Falling Commercial Real Estate Values Threaten Smaller Banks with Risk of Defaults
• Falling commercial property values raise solvency risks for hundreds of smaller US banks
• About 14% of commercial real estate loans and 44% of office building loans appear to be "underwater"
• This raises default risk as borrowers' equity is wiped out
• A 10% default rate could cause $80B in bank losses; 20% default rate could cause $160B in losses
• Commercial real estate loan delinquency rate rose from 0.45% to 0.85% year-over-year