Small and midsized banks could face another crisis due to their outsized investment in the commercial real estate sector, which is struggling under the weight of a lack of demand and high interest rates, experts told the Daily Caller News Foundation.
Small banks, defined as those outside the top 25 in assets, hold only 36% of all loans but own around 70% of commercial real estate loans, according to Federal Reserve data reviewed by the DCNF. Smaller banks’ exposure to the struggling commercial real estate sector poses a significant risk in terms of triggering another banking crisis, as those banks rely on returns from indebted developers that they might not be able to payout, experts told the DCNF.
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