"In the commercial and residential real estate sectors, we worry that borrowers could become increasingly speculative, buying beyond their means and hoping for asset price appreciation — whether they are buying for their own use or strictly for the sake of investment," Bies said in remarks prepared for delivery to the North Carolina Bankers Association.
Regulators worry that in "the inevitable downturn," credit quality could deteriorate to the extent that some banks would experience significant losses, she said.
Fed officials are considering issuing supervisory guidance on sound risk-management practices for commercial real estate exposures, Bies said.
Bies did not discuss the broader economy or the outlook for interest rates in the text of her speech, which she gave on Kiawah Island, South Carolina. The Fed distributed a copy of Bies' remarks in Washington.
