The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency have jointly issued a final policy statement on commercial real estate loan accommodations and workouts. This collaborative effort comes as part of their ongoing commitment to promoting financial stability and supporting creditworthy borrowers during periods of economic uncertainty.
The finalized policy statement builds upon existing supervisory guidance, emphasizing the importance of financial institutions working prudently and constructively with creditworthy borrowers facing financial stress. The updated policy statement is based on a proposal issued in the preceding year, incorporating minor adjustments in response to valuable public comments. It supersedes the previous guidance issued in 2009 on commercial real estate loan workouts.
One noteworthy addition to the statement is a section dedicated to short-term loan accommodations, which was not included in the previous guidance. Such accommodations may involve deferring one or more payments, facilitating partial payments, or providing other forms of assistance or relief to borrowers navigating financial challenges.
Furthermore, the policy statement addresses recent accounting changes related to loan loss estimation and offers illustrative examples to guide financial institutions in classifying and accounting for loans affected by workout activity.
Importantly, this policy statement applies to all financial institutions supervised by the respective regulatory agencies, ensuring consistency and uniformity in the treatment of commercial real estate loans across the financial sector.
The collaborative efforts of the regulatory agencies aim to support economic resilience, promote responsible lending practices, and foster a stable financial environment in the face of dynamic economic conditions. By encouraging financial institutions to work closely with creditworthy borrowers during times of uncertainty, the agencies seek to mitigate potential risks and promote the long-term health of the commercial real estate market.
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230629a.htm