What do regulators do in the face of overwhelming evidence that they have failed at their jobs? They dust themselves off and try again, obviously.
Here’s American Banker on Monday:
Acknowledging that regulatory guidance to limit banks’ concentration in commercial real estate has failed, Comptroller of the Currency John Dugan said Friday that the banking agencies will issue new, tougher standards.
Regulators are weighing several options, he said, including tougher concentration caps, increased capital requirements, minimum underwriting standards and limits on banks that use wholesale funding to finance these loans.
“We need to revisit the issue of the appropriate regulatory response to CRE lending concentrations, especially for construction and development lending, and especially for concentrations supported by noncore funding,” Dugan told the Independent Community Bankers of America conference in Orlando. “While the concentration guidance we issued in 2006 was necessary — even though it was opposed by many parts of the industry — in retrospect, it has obviously not worked as well as we would have liked.”
Just to reiterate, Dugan thinks the previous guidance issued to America’s small and regional banks on their commercial real estate exposure “has obviously not worked as well as we would have liked.”
A serious contender for the understatement of the year award, that.
Related links:
‘The most serious wave of commercial real estate difficulties is just now beginning’ – FT Alphaville
The feedback loop of commercial real estate, regional banks and unemployment – FT Alphaville
The not-so-small small bank CRE problem – FT Alphaville