US stress tests overlooked commercial real estate threat

WASHINGTON, DC – Stress tests conducted under the US Capital Adequacy Program (Cap) in 2009 failed to identify billions of dollars of potential losses in commercial real estate (CRE) for US banks, according to a report from the US Congressional Oversight Panel for the Troubled Assets Relief Program (Tarp).

The bulk of the losses will come in 2011 and later, but the stress tests only examined banks’ capital adequacy under two stress scenarios up to the end of 2010, the report says. Also, the

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