July 14, 2007
Ojai, CA -- 36% of banks would fail the recent hurdles suggested by the interagency CRE guidance.  Of nearly 8,000 banks in the US, 33% of those banks had total CRE concentrations above 300% of capital.  In addition, 25% of the banks had construction loan concentrations above the 100% threshold.  Banks that failed one or both of the hurdles comprised over 36% of the banking system. 

The recent regulatory guidance on CRE provides guidelines for determining what is an adverse concentration.  The guidance specifies a hurdle of 100% of capital in Construction loans and 300% of capital in total CRE loans.  Although this is not a hard and fast limit, the regulators will require more rigorous risk management for those institutions that exceed these levels.  

The attachment provides a listing of all insured banks in the US with their ranking in the two areas as of 2006: Total CRE and construction loans (both as a percent of total capital).