Federal banking regulators spent the past few years encouraging banks to lend to creditworthy borrowers in the commercial real estate segment, while also enforcing rules to ensure commercial real estate concentration levels do not reach dangerous levels at community banks. But it seems their own guidance is somewhat at odds with bank examiners. A new report from the Government Accountability Office addressed this dichotomy head on. "High CRE concentrations also can limit a bank's ability to lend because the bank may need to raise capital to mitigate the concentration risk during a downturn," the report finds. In 2006, regulators issued guidance on loan concentration and risk management, as well as training for examiners, to help them remain compliant with commercial real estate guidance. The point of the guidance was to allow banks to safely grow CRE activity, while also providing standards for when a bank should be required to reduce its CRE loan concentration. The standards were designed to address a growing problem — namely the fact that CRE loans are a main culprit today in bringing banking institutions down. Commercial real estate accounted for 77% of the nonperforming loans at the most recently failed banks, analytics firm Trepp said earlier this year. Regulators closed six banks on April 15, accounting for a total of $4.8 billion in assets. So far in 2011, there have been 34 closings, according to Trepp. But, some banks are now accusing examiners of being too harsh in their treatment of CRE loans, making banks less willing to write business at a time when the CRE segment is in need of more activity. GAO concluded that while examiners usually provide support for exam findings on loan workouts, there are still some inconsistencies when examiners apply  2006 CRE concentration guidelines. "Regulatory officials had varying views on the adequacy of the 2006 guidance, and some examiners and bankers noted that the guidance lacked clarity on how to comply with it," GAO reported. To address these fears and conflicts at a time when a pickup in CRE activity is needed, the GAO issued new recommendations, saying banking regulators should enhance the 2006 CRE concentration guidance and implement improved steps to ensure examiners consistently apply the rules. Write to: Kerri Panchuk.