Fed flags high-risk banks with loans vulnerable to real estate downturn

The Fed is monitoring 60 banks with both high commercial real estate (CRE) exposure and uninsured deposits, putting them at higher risk.

Smaller community banks have extremely high CRE exposure compared to larger banks, raising concerns about failures.

Over $900 billion in CRE loans are set to mature in 2024, facing renewal in a tougher economic environment.

Fed Chair Powell specifically called out banks with both CRE exposure and uninsured deposits as vulnerable.

A professor examined call reports and found around 400 banks had CRE exposure above 300% of their Tier 1 capital and uninsured deposits above 36.5%.