- Madison Associates LLC - http://madisonassociatesllc.com -

Bank Regulatory Policy Statements for Commercial Lending

[1]From time to time the bank regulators issue guidelines as to what they expect form lenders with respect to risk management and administration of their commercial loan portfolios. A quick review of such pronouncements for the last several years reveals four statements that should be of interest to lenders. We list these here for easy reference. In the future these and other regulatory guidelines will be listed on the Madison Associates web site as a convenience to readers. We welcome your suggestions as to other regulations and guidelines that would be of interest.

Concentration in Real Estate Lending Guidelines � December 12, 2006. This statement describes what the regulators expect from the administration of commercial real estate loan portfolios. In particular, it identifies their expectations for lenders with higher risks in their commercial real estate loan portfolio. The guideline suggest that lenders should be able to stress test their portfolios, have more detailed reporting to bank management and the Board of Directors regarding the risks in the portfolio, maintain the ability to analyze or �slice and dice� the portfolio for easy analysis, and maintain automated systems for the management of their portfolios, among other requirements. For a copy of this guideline click here. [2]

Update on Accounting for Loan and Lease Losses (ALLL)�March 1, 2004. This 2 page document contains a list of the then-current sources of GAAP and supervisory guidance for accounting for the ALLL that will be of interest to readers that are looking for a comprehensive listing of regulatory and accounting guidance for ALLL. For a copy of this guideline click here. [3]

Interagency Policy Statement of Allowance for Loan and Lease Losses � December 13, 2006. This guideline is intended to ensure that banking regulations are consistent with GAAP (Generally Accepted Accounting Principles) for the Allowance for Losses on Loans and Leases. It updates and replaces the previous policy issues in 1993. For a copy of this guideline click here. [4]

Interagency Appraisal and Evaluation Guidelines � December 2, 2010. This guideline was issued to address supervisory matters relating to real estate appraisals and evaluations used to support real estate-related financial transactions. It supersedes the previous guideline issues in 1994. The appraisal regulations require, at a minimum, that real estate appraisals be performed in accordance with generally accepted uniform appraisal standards as evidenced by the appraisal standards promulgated by the Appraisal Standards Board, and that such appraisals be in writing. This 45 page statement describes how lenders are expected to comply with the appraisal of real estate. For a copy of this guideline click here. [5]