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WASHINGTON — Banks with highly concentrated levels of commercial real estate loans in their portfolios, will be subject to scrutiny under final guidelines released Dec. 6 by industry regulators.

The guidelines were jointly issued by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corp. and sets forth sound risk management practices that an institution should employ when it has CRE concentration risk, according to the regulators. Credit concentrations are broadly defined as groups or classes of credit exposures that share common risk characteristics or sensitivities to economic, financial, or business developments. The agencies said they would use certain criteria to identify institutions that are potentially exposed to significant CRE concentration risk. Criteria include institutions that have experienced rapid growth in CRE lending, have notable exposure to a specific type of CRE, or are approaching or exceed the following supervisory criteria may be identified for further supervisory analysis to assess the nature and risk posed by the concentration: total reported loans for construction, land development, and other land loans represent 100% or more of the institution’s total risk-based capital; or if total commercial real estate loans, represent 300% or more of the institution’s total risk-based capital. If the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months, the agencies will also take a look at lending activity.

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