Update: Commercial real estate and bank failures

November 1, 2009 | By Jim Kim

We all know that commercial real estate is on the rocks right now. Nine more banks just failed, due in part to commercial real estate. The issue is how bad all this will ultimately be for the banking industry and whether they are adding to their loan loss reserves at an adequate pace.

Fortune notes data from Foresight Analytics that estimates banks "should have booked losses on around $110 billion of defaulted commercial real estate and construction loans." So far, they've taken losses only a third of that amount. Most assume the actual losses will hit next year, so it's a good bet that banks will steadily hike reserves.

No less than Wilbur Ross argues a massive commercial real estate crash is in the works. The biggest losers will likely be small to medium sized banks. Those with between $100 million and $10 billion in assets have about $900 billion worth of commercial real estate exposure. This will certainly pose a challenge for the FDIC, as the number of banks that fail will head higher.

For more:
- here's the article