Falling Commercial-Property Values Are Raising US Small Banks’ Solvency Risks

Falling Commercial-Property Values Are Raising US Small Banks’ Solvency Risks

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Falling commercial-property values are raising solvency risks for potentially hundreds of US banks, according to a new report prepared for the National Bureau of Economic Research.

About 14% of all commercial real estate loans and 44% of loans on office buildings appear to be in “negative equity,” meaning the debt is now greater than the property value. That raises the risk borrowers won’t repay because their stakes are wiped out, according to the report.

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