Smaller US banks face unequal real estate risk, paper says

St Louis Fed research finds lenders hold 40% to 75% of commercial real estate debt

looking down on city

Smaller US banks are more exposed than larger ones to “looming” real estate risks, research published by the Federal Reserve Bank of St Louis says.

Banks with smaller levels of asset holding are most associated with commercial real estate risk, say Miguel Faria e Castro and Samuel Jordan-Wood. The most exposed banks also “have lower liquidity ratios, lower Tier 1 capital ratios, fewer loan-loss provisions and lower market returns”, the authors say.

Rising interest rates and slower rent growth

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