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Banks Facing CMBS Writedowns

Some of the largest U.S. and international banks may face billions of dollars in fourth quarter write-downs from commercial mortgage- backed securities, whose values took a nosedive in November.

According to data from Standard & Poor's, nine large banks hold a total of about $121.1 billion in commercial real estate loan assets that must be marked to market. The group is led by Citigroup Inc. (C), Merrill Lynch & Co. (MER) and Barclays PLC (BCS), which each hold more than $20 billion in commercial mortgage-related securities and investments.

The banks hold these assets separately from their traditional loans, which banks typically hold to maturity. That means the firms must generally adjust the values of these non-traditional assets to reflect current values - hence the specter of write-downs.

Stocks of major life insurance companies have been hurt in the past month over concerns about their exposure to commercial mortgage-backed securities. At banks, by contrast, residential mortgages - which triggered the broad financial crisis now enveloping the globe - have been the principal source of losses and write-downs.


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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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