Banks are raising money to brace for losses from commercial real estate

Banks across the nation added to credit reserves in the first half of the year in an effort to protect against further losses from commercial real estate and some consumer loans, Bloomberg reports. 

In its twice-yearly supervision and regulation report released Friday, the Federal Reserve says the delinquency rate for CRE loans has increased to its highest level in a decade, jumping to 11% at the large banks in the second quarter of 2024.

“The deterioration in CRE loans has so far been mostly concentrated at large banks,” the report says. “However the delinquency rate for CRE loans held by smaller banks also increased in the first half of 2024.”

Smaller banks generally hold a higher share of their assets in CRE loans compared to large banks.

Most banks are reporting capital levels above what regulation requires, and liquidity and funding conditions remain stable, the report says.

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