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US banks on alert over falling commercial real estate valuations

Lenders increase provisions for losses on property loans as office values drop

US banks are becoming increasingly worried about falling commercial property valuations and the risk they pose to lenders’ balance sheets, senior executives said this week.

Office valuations in particular have been pummelled by rising interest rates and many employees’ preference for working from home since the coronavirus pandemic.

However, financial executives sought to reassure investors that they did not foresee significant systemic risk because holdings are broadly distributed among banks and other institutions.

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