OCC 2006-2
OCC BULLETIN
Subject:  Concentrations in 
Commercial Real Estate Lending,
Sound Risk Management Practices
Description:Request for Comment
on Proposed Guidance
Date:  January 20, 2006                                                                                           
                                                                 
TO:  Chief Executive Officers of All National Banks, Federal
     Branches and Agencies, Department and Division Heads, and
     All Examining Personnel

The Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision, and the
National Credit Union Administration (agencies) are seeking
comment on proposed guidance for concentrations in commercial
real estate (CRE) lending and sound risk management practices.
This notice and request for comment was published in the Federal
Register on January 13, 2006 (attached).

The agencies have observed that some institutions have high and
increasing concentrations of commercial real estate loans on
their balance sheets and are concerned that these concentrations
may make the institutions more vulnerable to cyclical commercial
real estate markets.  This proposed guidance helps identify
institutions with commercial real estate loan concentrations that
may be subject to greater supervisory scrutiny.  As provided in
the proposed guidance, such institutions should have in place
risk management practices and capital levels appropriate to the
risk associated with these concentrations.

For the purposes of the proposed guidance, the agencies are
focusing on concentrations in those types of CRE loans that are
particularly vulnerable to cyclical commercial real estate
markets.  These include CRE exposures where the source of
repayment primarily depends upon rental income or the sale,
refinancing, or permanent financing of the property.  Loans to
real estate investment trusts (REITs) and unsecured loans to
developers that closely correlate to the inherent risk in CRE
markets would also be considered CRE loans for purposes of the
proposed guidance.

Comment is requested on all aspects of the guidance.  Comments
will be accepted through March 14, 2006.  For further
information, contact Daniel Bailey, national bank examiner or
Doreen Ledbetter, national bank examiner, Credit Risk Policy
Division, at (202) 874-5170.

Barbara J. Grunkemeyer
Deputy Comptroller
Credit Risk Division


Attachment:  Concentrations in Commercial Real Estate Lending,
Sound Risk Management Practices
        [http://www.occ.treas.gov/fr/fedregister/71fr2302.pdf]