FSOC Report Highlights CRE Risk

December 18, 2023

The Financial Stability Oversight Council’s (FSOC) 2023 annual report listed commercial real estate exposure as an ongoing risk to the financial system. The CRE analysis begins on page 18. The report also covers financial risks stemming from climate change.

Why it matters: FSOC is the Dodd-Frank creation that brings together top federal regulators to identify and address systemic risks to the economy.

“As losses from a CRE loan portfolio accumulate, they can spill over into the broader financial system. Sales of financially distressed properties can reduce market values of nearby properties, lead to a broader downward CRE valuation spiral, and even reduce municipalities’ property tax revenues.” -FSOC 2023 Annual Report


By the numbers: FSOC highlighted delinquency performance in CRE bank loans and CMBS.

  • CRE delinquency rate at U.S. banks was 0.81% in Q2 2023, up from 0.74% in Q2 2022.
  • Conduit CMBS delinquency reached 4.3% in Sep. 2023, up from a post-pandemic low of 3.5% in April 2023.

FSOC lists several recommendations for supervisors, financial institutions, and investors to address CRE risk:

  • Closely monitor CRE exposures and concentrations, and track market conditions.
  • Evaluate loan portfolios’ resilience to potential stress, ensure adequate credit loss allowances, assess CRE underwriting standards, and review contingency planning for a possibly protracted period of raising loan delinquencies.
  • Study “interlinkages” among financial intermediaries in the CRE market, including banks, insurance companies, REITs, and private lenders. FSOC notes that these exposures could amplify financial stress in the sector and that regulators should collaborate to better understand the dynamics.
Contact Sairah Burki (sburki@crefc.org) and David McCarthy (dmccarthy@crefc.org) with questions. 


Sairah Burki
Managing Director, Regulatory Affairs

David McCarthy
Managing Director, Head of Policy

Experts also remain bullish on a positive end to the trade war and other uncertainties clouding the economic outlook.
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.

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