Capital Economics’ US Economics Weekly released today argues that CRE loan losses pose little risk of bringing down large banks (>$1 billion in assets) as only 18% of these institutions’ loans are CRE. For smaller banks (<$1 billion in assets) the risk of CRE losses causing bank failures is much greater since 40% of their loans are CRE. While both the default and charge off rates have been increasing dramatically, they do not see them reaching levels on a system-wide basis that would call the viability of the sector into question.
