The Federal Reserve is concerned about regional banks' exposure to commercial real estate, highlighting potential risks.

The Federal Reserve stated that it is closely monitoring the investment portfolios of community and regional banks due to concerns about "high interest rates, tightening underwriting standards, and declining commercial real estate values." A regulatory report released on Monday showed that the Federal Reserve warned that these factors could affect borrowers' ability to refinance or repay loans. Regulatory agencies are closely monitoring trends in commercial real estate loans and examining underwriting practices and levels of credit loss reserves. For Wall Street, the Federal Reserve's focus is on weaknesses in their capital planning and liquidity risk management. However, the report indicated that the capital levels of the vast majority of banks as of the second quarter still far exceeded applicable regulatory requirements. The report stated, "Stress test results indicate that large banks have the ability to withstand severe recessions while maintaining minimum capital requirements and continue to lend to households and businesses."