“We have a very strong view that in the near future, you’re going to start seeing a lot of consolidation of these banks, and I think if you look at it on a macro scale, there’s a big necessity right now for this consolidation.”
Should regulators embrace a shift towards commercial private solutions?
A “stalemate” is likely to prevail for the better part of 2024 and into 2025, Horn added, with doubts over the current value of banks’ real estate and loan books throwing their present ability to buy another bank – or get purchased themselves – into question.
Regulators would likely welcome that consolidation as a step towards stabilizing the space, although Horn said they should also understand the ability of private lenders to provide solutions where overexposed banks cannot.
“I think they actually should be encouraging more the proliferation of the private debt and private lending world, which by all means already have grown a lot,” he said. “It’s become a much bigger part of the lending ecosystem in the last 10 years.
Federal Reserve Chair Jerome Powell echoed concerns about mounting bad commercial real estate loans potentially leading to some bank failures, though he assured lawmakers that the overall system remains stable. https://t.co/QhRqebbPOz#bankfailure #commercialmarket
— Mortgage Professional America Magazine (@MPAMagazineUS) March 8, 2024
“But what it actually does, and it does well, is it shifts away the risks from depositors and in turn FDIC [Federal Deposit Insurance Corporation], from these banks that are doing riskier deals, to private lenders who are capitalized by sophisticated institutional investors who are very aware of the deals that they’re doing.”
Source: mpamag.com