DBRS Morningstar Releases Commercial Real Estate Commentary on Assessing Global Bank Exposure

DBRS Limited (DBRS Morningstar) published a commentary titled “Assessing Global Bank Exposure to Commercial Real Estate: Hindered by Disclosure Limitations.” The primary objective of this commentary is to highlight that the data available to assess commercial real estate (CRE) exposures is limited because public disclosures made by banks about their CRE lending typically do not provide enough details regarding composition by property type, banks' underwriting standards, and the geographic diversification of their CRE loans.

The commentary highlights the following:
-- Banks' public disclosures on CRE exposures typically do not provide enough details regarding their composition by property type, the underwriting standards employed by these banks, and the geographic diversification of their CRE loans.
-- The lack of consistent in-depth disclosures, as well as different market structures and practices, makes comparisons difficult, especially in Europe and Canada.
-- Going forward, we would like to see broader participation from banks globally in providing the necessary information in order to appropriately assess the risks in their CRE loan portfolios.
-- We also encourage regulators globally to work together to further enhance the transparency and comparability of CRE exposures across jurisdictions.

Given CRE historical trends and the nature of the current downturn driven by the Coronavirus Disease (COVID-19) pandemic, “we expect banks with high concentrations of CRE to be more vulnerable to the economic fallout than those with more diversified loan portfolios,” said Robert Colangelo, Senior Vice President, Global Financial Institutions Group. “While DBRS Morningstar assesses and monitors CRE credit risk in the loan portfolios of the banks within our coverage universe, current disclosure levels are still insufficient and not comparable across geographies.”

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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