What happened: At the Bloomberg Invest conference, Soros Fund Management CEO Dawn Fitzpatrick said a credit contraction is inevitable, and more banks could fail because of underlying problems. She pointed to commercial real estate, which has been negatively impacted by remote work and rising interest rates, as an area of concern.
What the numbers say: According to Appollo Global Management's chief economist, Torsten Slok, around 700 U.S. banks have exceeded the FDIC guidance established in 2006 for commercial real estate loan concentration. Banks exceeding the guideline numbers could face higher capital requirements and heightened risk management practices. Office values are down 27%, and the average commercial property value has declined 15%. Relevance: These challenges could make it even more difficult for property owners and developers to access credit. Morgan Stanley analysts expect commercial real estate to remain under pressure as regional banks face increased scrutiny. |
