FDIC Warns of Vulnerability From Commercial Real Estate

WASHINGTON - Federal Deposit Insurance Corp. Chairman Donna Tanoue warned Tuesday that a growing number of banks are overexposed to commercial real estate loans and therefore particularly vulnerable to an economic downturn.

Nine percent of banks and thrifts risk a downgrade in their supervisory rating because of a high ratio of construction and development loans to assets, rapid asset growth, and high noncore funding, Ms. Tanoue said. That is nearly twice the percentage in 1995. "We believe that some banks have developed certain portfolio characteristics that leave them vulnerable to potential softening in local real estate markets," Ms. Tanoue said at a Risk Management Association conference in Nashville.