In 2006, regulators issued a Policy Statement in response to increased CRE lending practices at banks (Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices). It is acceptable for banks to have a concentration, however if they do, the bank must have adequate risk management practices to control the risk.

Our CRE Concentration Risk Management Practices Review will review the bank’s systems for complying with the regulatory guidelines. We will review:

• Oversight provided by the board of directors and senior management
• Portfolio management
• Management information systems
• Market analysis
• Credit underwriting standards
• Portfolio stress testing and sensitivity analysis
• Credit risk review function