Given the depth of the last financial crisis, it is no surprise that observers are keeping a close eye on weaknesses that could negatively impact the banking sector and capital markets in general. “Overall, the system continues to function, as it should, safely providing liquidity,” says CrediFi CEO Ely Razin. “However, there are pockets of concern already and more may form, if and when there is a downturn.”
CrediFi recently published a commercial real estate lending report that suggests that the banking system has much greater commercial real estate risk exposure than publicly recognized. Top concerns highlighted in the report are associated with levels of lending to “more opaque” property sectors, including retail and industrial. In addition, the report noted potential risks from out-of-norm lending by banks that occasionally take on loans that are outsized or out-of-character for them.