FDIC's Bair: Commercial real estate a challenge

‘The most prominent area of risk for banks,’ regulator says

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updated 2:53 p.m. ET Oct. 14, 2009

WASHINGTON - Federal regulators say rising losses on commercial real estate loans will continue to hurt U.S. banks in coming months and pose the biggest challenge for many financial institutions and their overseers.

Federal Deposit Insurance Corp. Chairman Sheila Bair said Wednesday real estate loans will continue to be "the most prominent area of risk" for banks over the next several quarters.

In testimony prepared for a Senate hearing, Bair says the $6.2 billion in loans backed by commercial properties that banks wrote off as lost in the past two years will likely grow sharply as more loans come due.

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Bair and U.S. Comptroller of the Currency John Dugan disputed accusations that regulators have been telling banks to restrain lending in the high-risk climate.

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