Big Banks’ CRE Exposure Rises 40% When REIT Debt Is Factored in
- Term loans and credit lines for REITs add to systemic risk
- Fed stress tests should consider such lending, authors say
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Large US banks may be more exposed to commercial property than regulators appreciate because of credit lines and term loans they provide to real estate investment trusts, according to a new study.
Big banks’ exposure to CRE lending grows by about 40% when that indirect lending to REITs is added, wrote researchers including Viral Acharya, a professor of economics at New York University. That’s largely been missed in the debate about the risks the troubled industry poses to lenders, they argue.