HomeFinancial MarketsRecovering Banking Sector Faced With Mounting Real Estate Pressures

Recovering Banking Sector Faced With Mounting Real Estate Pressures

Although market confidence in the U.S. regional banks is being restored following the cooldown in the banking crisis, banks are now faced with an impending threat from the real estate sector.

Soros Fund Management Chief Executive Officer Dawn Fitzpatrick claimed at the Bloomberg Invest conference that contractions are coming due to a cutback on commercial real estate loans; an area that regional banks have become increasingly involved in. The growing working-from-home trend has reduced the demand for commercial properties, while interest rates have made properties less valuable.

“US banks have become much more vulnerable to a decline in commercial real estate prices,” Torsten Slok, chief economist at Apollo Global Management Inc., told clients in an email this week.

While the Federal Deposit Insurance Corp has not officially commented on the commercial property threat facing the banking sector, the FDIC’s chairman Martin Gruenberg commented last month that the potential issues concerning property portfolios require “ongoing supervisory attention.”

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