Losses on commercial real estate loans pose the biggest risk to U.S. banks this year, troubling smaller lenders while unlikely to threaten the entire financial system.

"Losses from commercial real estate will be quite high by historic standards," said Eugene Ludwig, a former comptroller of the currency who is now chairman of Promontory Financial Group, a Washington consulting firm to financial institutions. "Hundreds of banks will fail or will be resolved over the course of the cycle."

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