US Treasury Secretary: "Concerns Over Commercial Real Estate... Should Be Manageable"

Janet Yellen Minister
"Supervisory authorities checking bank reserves and liquidity"

U.S. Treasury Secretary Janet Yellen said on the 6th (local time) that although there are concerns about financial instability related to the U.S. commercial real estate downturn, which is spreading to financial sectors in Asia and Europe, it is manageable.

[Image source=Yonhap News]

Secretary Yellen appeared before the U.S. House Financial Services Committee that day and responded to a question from Democratic Representative Emanuel Cleaver (Missouri) regarding commercial real estate, stating, "I am concerned."

She predicted, "Multiple factors will put significant stress on these (commercial) real estate owners." She pointed out issues such as high interest rates, rising vacancy rates due to the spread of remote work after the pandemic, and the large volume of commercial real estate loans maturing consecutively this year.

However, she forecasted that the commercial real estate problem would not spread as a risk to the entire financial sector.

Secretary Yellen explained, "While some institutions are under considerable stress due to this issue, I believe it is manageable," adding, "Bank regulators are focusing on this issue and are verifying whether lenders have sufficient reserves and liquidity." However, she did not specify which financial companies are experiencing an increased risk of insolvency.

As the U.S. commercial real estate market downturn continues, the feared financial sector instability has recently begun to materialize. Due to interest rate hikes and rising office vacancy rates, commercial real estate owners are increasingly unable to repay loan principal and interest, leading banks to write off related loans as losses. New York Community Bancorp (NYCB), which suffered losses of $185 million (approximately 246 billion KRW) from two commercial real estate loans, has seen its stock price halved this month. According to JP Morgan, small and medium-sized banks hold 28.7% of U.S. commercial real estate loans, so further impacts are expected to continue centered on these banks.

The crisis has also spread to Asia and Europe, with Japan's Aozora Bank and Switzerland's Julius Baer Bank, both investors in U.S. commercial real estate, recently incurring massive losses and deciding that their CEOs will resign.

This content was produced with the assistance of AI translation services.