"Shocked by Yellen's Remarks on US Commercial Real Estate Concerns... NYCB Stock Plummets 22% (Update)"

US Treasury Secretary: "Significant Stress in Some Institutions"

U.S. Treasury Secretary Janet Yellen stated on the 6th (local time) that there are concerns about a downturn in the U.S. commercial real estate market, and that several financial institutions will face significant stress. Following this, the stock price of New York Community Bancorp (NYCB), a regional U.S. bank that recently plummeted due to commercial real estate loan defaults, fell again by more than 20%.

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

She forecasted that "multiple factors will put considerable stress on these (commercial) real estate owners." She pointed out issues such as high interest rates, increased 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 predicted 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 significant stress due to this issue, I believe it is manageable," adding, "Bank regulators are focusing on this problem and are verifying whether lenders have sufficient reserves and liquidity." However, she did not specify which financial companies are experiencing an expanding risk of default.

As Yellen's remarks heightened concerns, NYCB's stock price closed at $4.20 per share, plunging 22.22% that day. This is the lowest level since 1997. The situation was worsened by some shareholders filing lawsuits in court, alleging that NYCB concealed commercial real estate loan defaults. The bank revealed losses of $185 million (approximately 246 billion KRW) from two commercial real estate loans, causing its stock price to plummet 60% since the 31st of last month. Its market capitalization evaporated by $4.5 billion (5.99 trillion KRW).

As the U.S. commercial real estate market downturn prolongs, the previously anticipated financial sector defaults have 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. According to JP Morgan, small and medium-sized banks hold 28.7% of U.S. commercial real estate loans, and since they are subject to relatively lower capital regulation compared to large banks, concerns are rising that they will be more vulnerable to future loan defaults and suffer greater shocks.

The financial crisis triggered by the U.S. commercial real estate downturn is also spreading to Asia and Europe. Japan's Aozora Bank and Switzerland's Julius Baer Bank recently reported massive losses from U.S. commercial real estate loans, leading to the resignation of their chief executive officers (CEOs).

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