USB - 'There Will Be More Failures' Powell Says In Warning For Regional Banks Over Commercial Real Estate Loans | Benzinga
“There will be more bank failures.” This was the stark message from Federal Reserve chairman Jerome Powell on Thursday, addressing the exposure of regional banks to the crisis in the commercial real estate sector.
Powell was speaking before the Senate Banking Committee and said the Fed had identified the banks most at risk.
“It’s not a first-order issue for any of the very large banks. It's more smaller and medium-sized banks that have these issues,” he told the committee.
Recent data from Apollo Academy estimated that smaller banks hold almost 70% of the outstanding loans from commercial real estate (CRE) borrowers. Among these, it added, banks with total assets between $1 billion and $10 billion were carrying CRE loans worth an average of nearly 35% of their total assets.
Larger banks with more than $250 billion worth of assets typically had CRE exposure of little more than 5% of their assets.
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Powell identified the problem as stemming from the change in working practices that were enforced during the COVID-19 pandemic, when many office staff were ordered to work from home. They were slow to ...