More regional bank crises are looming in the United States! Several banks' commercial real estate loans are skyrocketing, and regulatory crackdown is imminent.

According to reports from US media, more than 20 regional banks in the United States had excessive commercial real estate loans by the end of last year, and regulators have instructed these loans to undergo more scrutiny. Analysts believe that this signal indicates that more banks may face regulatory pressure and be required to increase reserves. Last year, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency publicly warned the banking industry to carefully evaluate large loans for office buildings, retail spaces, and other commercial real estate. According to media analysis of data from over 350 bank holding companies, although New York Community Bancorp recently triggered a chain reaction of decline due to being required to replenish loan reserves, compared to other smaller lending institutions, New York Community Bancorp is already the largest bank that meets regulatory standards. Many small and medium-sized banks have accumulated commercial real estate loans at a faster pace. The three regulatory agencies stated that they will focus on banks whose commercial real estate loan portfolios exceed three times their total capital. Among these banks, regulators will pay special attention to those whose commercial real estate loan portfolios have grown by at least 50% in the past three years. If these two thresholds are exceeded, they may face strict scrutiny. This indicates that regulatory agencies are seeking to identify banks that may face risks due to excessive commercial real estate holdings in order to take action before the risks materialize. According to media investigations, among regional banks with assets ranging from $10 billion to $100 billion, 22 of them hold commercial real estate loans that are more than three times their capital, and half of these banks have seen their commercial real estate loan growth rate exceed 50%. In community banks with assets less than $10 billion, this number is even higher: 47 banks have oversized loan portfolios, and 13 of them have experienced rapid growth. According to data from September 30th of last year, companies that exceed these two thresholds include Valley National Bancorp, WaFd Inc., and Axos Financial Inc. Due to investors' concerns about exposure to commercial real estate and the possibility that regulatory agencies may require some banks to increase reserves or restrict dividends, shares of these regional banks and many other banks have been declining since late January. Whether regulatory agencies will take additional measures will depend on a more thorough examination of the loans. Keith Noreika, who served as Acting Comptroller of the Currency in 2017, said, "We are in the warning stage. The warning lights on the dashboard are on, and now people are opening the hood to see if something is really wrong or if we just need to keep an eye on it." Of course, regulatory agencies will not limit their scrutiny to banks with excessive and rapidly growing commercial real estate loan portfolios, and even if some banks do exceed these thresholds, it does not necessarily mean that further attention will be triggered. Loan performance can vary greatly. "It is very important to maintain a good dialogue with regulatory agencies and let them understand what is happening. So we feel that we have a very good dialogue and not too many concerns," said Ira Robbins, CEO of Valley National, on Thursday. "Regulatory agencies must do their job and understand what is happening in the market. If there is a specific area that requires high attention and scrutiny, they will definitely come in and spend more time looking into that area. But I don't think this is any different from what happens when there are more concerns in other industries." WaFd Bank, on the other hand, stated that they intend to increase loans for multi-family buildings that are already in use. Analysts believe that this strategy indicates that the bank is focusing on properties with existing tenants, as these are seen as lower risk investments with relatively stable income streams. In the commercial real estate sector, "stability" in properties usually means that they have completed leasing activities, have a stable cash flow, and a known operating history, making loans on these properties relatively safer. "Based on our own historical experience and industry data from the FDIC, stable multi-family loans are the lowest risk loans that our bank can make," said Brent Beardall, CEO of the bank, in a statement. Spokespersons for the three regulatory agencies, New York Community Bancorp, and Axos declined to comment or did not respond. Analysts believe that the massive shift to remote work following the COVID-19 pandemic has already caused significant pain in the office real estate sector. With rising interest rates leading to a decline in commercial real estate values, investors are concerned about potential issues that may arise for lending institutions. Even institutions of the scale of Blackstone Inc. and Brookfield Asset Management Ltd. have defaulted on certain debts.