FT: Housing Construction Boom Threatens Already Stressed Banks

U.S. regulators and financial watchdogs reportedly are raising concerns about banks’ exposure to the frothy American real-estate market after developers went on a building binge.

Officials at the Federal Reserve “ordered banks to set out how they would fare if commercial real estate (CRE) prices dropped 35 percent and rental apartment values collapsed by more,” the Financial Times reported.

While a simulated property downturn has long been part of banks’ annual ‘stress tests,’ the Fed “has made CRE risks a bigger focus this year, reflecting increasing worries that bubbles are forming in parts of U.S. real estate,” the FT reported.

“We’re being very wary of it right now,” Mary Ann Scully, chief executive of Maryland-based Howard Bank, told the FT. “The wound has healed, the scab is gone, and we [as an industry] are thinking this isn’t such a bad asset class after all — but we often have shorter

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