John At The Center

One of the biggest problems smaller banks face is more exposure to commercial real estate, a sector that investors expect has further to fall. That could result in greater asset write-downs for this corner of banking. Losses on real estate could lead to more failures and easily stymie lending, particularly to smaller businesses.

Though they account for less than 12 percent of banking assets, financial institutions with less than $1 billion in assets make nearly a third of all loans of $1 million or less to businesses, the Independent Community Bankers Association says. Less lending could have powerful negative consequences for an economy already struggling to rebound.

via Reuters Breakingviews – Real Estate Could Be a Red Flag for Smaller Banks – NYTimes.com.