The interagency guidance specifically calls for banks actively involved in CRE lending to perform ongoing risk assessments.  These assessments should address such areas as Board and Management Oversight, Portfolio Management, Contingency Planning, Management Information Systems, Market Analysis, Underwriting Standards, Portfolio Stress Testing, and the Credit Risk Review function. 

The regulatory thrust appears to be to determine whether banks that have high CRE concentrations also have adequate internal management systems to oversee and control the exposure.  In our opinion, banks should be aggressive in addressing these issues up front, and well before the next examination.  Banks should first perform a self assessment of the existing system.  The assessment should be in writing and directed to senior management and the board.  Then the bank needs to determine how much to invest in enhancing the existing system. 

We will provide an assessment of your bank's concentration in CRE.  The assessment will evaluate the inherent level of CRE concentration risk within your bank's portfolio.  It will then assess the level of risk management controls over CRE concentrations risk.  Finally, it will provide solutions for improving risk management practices.  The assessment will address issues raised in the interagency guidance on CRE concentrations and will review the following specific areas:

• Board and Management Oversight
• Policies, Procedures and Limits
• Strategic Planning
• Credit Underwriting Standards and Loan Pricing
• Market analysis
• Portfolio Management
• Portfolio Stress Testing and Sensitivity Analysis
• Reserves and Capital
• MIS and regulatory reporting
• Credit Review Function
• Other controls - appraisals, site visits, audits, internal controls