Her
remarks, made during a speech
at the Brookings Institution in Washington D.C., outlined the Fed’s
current assessment of financial stability focusing on four key areas: household
and business leverage, financial institution leverage, funding risk, and asset
valuations.
Why it matters: Cook is one
of the seven members of the Board of Governors of the Federal Reserve, which
regulates member banks and has a hand in crafting and approving bank
regulation.
What they’re saying: Cook
emphasized that CRE encompasses broad asset classes and geographies, and that
the Fed is carefully monitoring concentration risk in small and regional banks.
Excerpts from her speech are below:
- “CRE is a broad asset
class, encompassing multifamily housing, hospitality, retail, warehouses,
office buildings, and many other business properties. Accounting for this
heterogeneity is important in assessing the risks associated with CRE.”
- “On average, CRE
loans make up only about 5%of total assets at large banks but around 30%
of assets at smaller banks. Those high concentrations have caused us to
step up our supervisory work with community and regional banks that have
significant CRE concentrations and to augment our regulatory data for this
sector.”
- “For instance, data
available from SEC Form 10-Q filings suggest that office exposures account
for a small share of most regional banks' CRE loans.”
Contact
David McCarthy (dmccarthy@crefc.org)
or Sairah Burki (sburki@crefc.org)
with questions.