The Securities and Exchange Commission (SEC) is currently investigating community and regional banks regarding their commercial real estate (CRE) exposure in their loan portfolios. According to a recent report by the Wall Street Journal, potential losses on these loans could lead to further reductions in lending.
In four separate letter exchanges, the SEC has raised concerns with smaller financial firms such as Alerus Financial, Mid Penn Bank’s holding company, Ohio Valley Bank’s holding company, and MainStreet Bank. These letters indicate that the SEC is increasingly interested in ensuring that investors have sufficient information to accurately assess a bank’s financial stability based on its disclosure of loan portfolios.
According to Kenneth Chin from law firm Kramer Levin Naftalis & Frankel who was interviewed by WSJ for this article stated that these letters demonstrate the SEC’s growing concern about whether investors are receiving enough information about a bank’s risk or exposure levels. This highlights how important it is for banks to disclose accurate data regarding CRE loans so investors can make informed decisions about their investments.
