Regulators Replace Policy Statement On Troubled CRE Loans And Allow Short-Term Accommodations

The Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, National Credit Union Administration, and Federal Deposit Insurance Corporation (collectively, the "Agencies") issued a joint Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts ("Statement"), which supersedes the 2009 Policy Statement on the same topic ("2009 Statement").

For financial institutions engaging with CRE borrowers experiencing financial difficulties, the Statement provides guidance on how to handle loan accommodations and workouts in connection with risk management, loan classifications, regulatory reporting, and accounting considerations, and appears to signal that financial institutions will not be penalized as a regulatory matter when working with their borrowers makes prudent sense. The Statement is generally consistent with the 2009 Statement, with a few main distinctionss, discussed further in this Client Alert.