March 22, 2023 | less than a minute read

Bank Crisis

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Doug Selph

Partner

Get in touch

Doug Selph

Partner

Bank failures continue to raise challenging questions for our commercial real estate clients, many of whom do not even have direct business relationships with Silicon Valley Bank or Signature Bank. Signature Bank had a huge presence as a deposit account bank for commercial real estate borrowers and countless deposit account control agreements (DACA's) among real estate lenders, borrowers and Signature Bank (as the deposit account bank) are now in question. The viability of letters of credit issued by these banks as well as other banks teetering on the precipice of bank failure are also being questioned. Fingers crossed that the banking markets will soon calm and the effect on commercial real estate transactions will not be as harmful as this article suggests.

As bank regulators work to stabilize the financial system, they will also need to keep an eye on banks holding too many commercial real estate loans in their portfolios — something that can create its own set of problems in a slowing economy. A report late last year by Moody’s Investors Service, the credit rating agency, found that 27 regional banks already had high concentrations of such loans on their balance sheets. The report said the issue could become problematic for banks if the economy fell into a recession. Image