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Interagency CRE concentration guidance (2006): 100% and 300% tests
Dec 2006· Law or rule
Fact, law or dataA rule, statute, definition or measured number.
Bank regulators' 2006 guidance that flags banks whose commercial real estate loans are large relative to their capital.
See it on the Money & Finance map →How it works
Issued in December 2006 by the OCC, Fed and FDIC, it sets two screens. First: construction, land development and other land loans at 100% or more of total capital. Second: all non-owner-occupied CRE loans at 300% or more of capital, with the CRE book up 50% or more in three years. These are not hard caps; banks above them must show board-set limits, stress tests and enough capital. Loans on owner-occupied buildings do not count. Regulators reaffirmed it in 2015.
Why it matters
It explains why a community bank may say it is 'full' on CRE, price higher or ask for deposits: each investor-property loan pushes it toward the 300% line.
Think of it like
Like a lender's tenant-concentration test: one tenant above a set share of rent triggers a harder look, not an automatic no.
Facts, rules and data
The December 12, 2006 Federal Register notice, the December 2015 interagency statement, and a 2013 GAO report linking CRE concentrations to bank failures in 2008–2011.
Debates and risks
Whether the thresholds are set well: critics say they ignore loan quality, while others called for hard limits after the 2023 regional-bank stress.
Connections (2)
▸Interagency CRE concentration guidance (2006): 100% and 300% tests flags banks heavily exposed to Bank balance-sheet loans from community and regional banksFact, law or data
The connection
Community and regional banks put a large share of their lending into CRE, so they are the ones that cross the 300% screen. Examiners then demand tighter limits and more capital. A bank near the line may slow new investor-property loans, widen spreads or require deposits, while owner-occupied loans, excluded from the count, stay easier to place.
When and why
US bank examinations since 2007, aimed mostly at community and regional banks; the issue returned in 2023–2024 as office values fell.
How we know
Fed and FDIC studies found concentrated banks failed more often in 2008–2011; public call reports let anyone compute a bank's ratio.
Debates and risks
Whether the screen simply pushes CRE lending toward debt funds and private credit, which face no such test.
▸Interagency CRE concentration guidance (2006): 100% and 300% tests sets a 100%-of-capital trigger for Construction loans and mini-permsFact, law or data
The connection
Construction and land loans carry the most risk: no rent yet, cost overruns and lease-up uncertainty. So the guidance set a lower trigger, 100% of capital, for them alone. Banks above it face extra scrutiny, which is why many cap their construction books and push developers toward more equity, mini-perms or debt funds.
When and why
Set in December 2006 at the end of a building boom; construction loans then drove many bank failures, notably in Georgia and Florida.
How we know
FDIC failed-bank reviews and a 2013 GAO report found heavy construction and land lending common among banks that failed in 2008–2011.
Debates and risks
Whether 100% is the right line: some banks run sound construction books well above it, while others fail below it.