The Real Estate Crisis Looming Over Banks

The sell-off in regional bank stocks looks set to worsen on Wednesday, after Moody’s cut New York Community Bancorp’s credit rating to junk status.

Fears are now rising among investors over the United States’ distressed commercial real estate sector. This comes as a crucial lifeline created during last year’s banking crisis is set to expire.

N.Y.C.B.’s shares plunged as much as 15 percent in premarket trading after the downgrade, before rebounding. The stock has plummeted roughly 60 percent in the past week after the lender reported dismal results, especially stemming from its exposure to souring commercial real estate loans.

Last year, N.Y.C.B. won the bidding for assets tied to Signature Bank, which failed shortly after the demise of Silicon Valley Bank. That pushed its assets above $100 billion, putting it into a new regulatory category, and subjecting it to more stringent capital requirements.