2022-19940: Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts

Summary

The Board of Governors of the Federal Reserve System (Board) is inviting comment on a proposed policy statement for prudent commercial real estate loan accommodations and workouts (proposed statement), which would be relevant to all financial institutions supervised by the Board. The proposed statement was developed jointly by the Board, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) in consultation with state bank and credit union regulators and is identical in content to the proposal issued by the OCC, FDIC, and NCUA on August 2, 2022. The proposed statement would build on existing guidance on the need for financial institutions to work prudently and constructively with creditworthy borrowers during times of financial stress, update existing interagency guidance on commercial real estate loan workouts, and add a new section on short- term loan accommodations. The proposed statement would also address recent accounting changes on estimating loan losses and provide updated examples of how to classify and account for loans subject to loan accommodations or loan workout activity. The proposed statement is timely in the post-pandemic era, as trends such as increased remote working may shift historic patterns of demand for commercial real estate in ways that adversely affect the financial condition and repayment capacity of CRE borrowers.

The agency’s own summary, as published.