The Federal Deposit Insurance Corp. (FDIC) adopted a policy statement stressing that performing commercial real estate (CRE) loans will not be subject to unfavorable classification for the sole purpose of declining values in underlying collateral. Working in coordination with other member agencies and the Federal Financial Institutions Examination Council (FFIEC), the FDIC adopted the policy to provide guidance to examiners and financial institutions working with CRE borrowers. Those borrowers experience a trickling cash flow, depreciated collateral values and delays in selling or renting commercial property. The FFIEC is an interagency body created to unify principles, standards and reporting in the supervision of financial institutions. The statement details risk-management practices for prudent loan workouts that are accurate and transparent. Financial institutions that implement these workout arrangements will escape FDIC criticism even if the loans have weaknesses that result in adverse credit classifications, according to the statement. Write to Jon Prior.
FDIC Adopts Guidelines on CRE Loan Workouts
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