Credit Risk Benchmarking Metrics Show Continued Softening in Construction
and the Real Estate and Rental & Leasing Industries
PHILADELPHIA, June 8 /CNW/ - The Risk Management Association (RMA), in
alliance with Automated Financial Systems, Inc. (AFS), this week released its
commercial benchmarking data updated through first quarter 2007. Results show
risk ratings in the broader middle market remaining relatively unchanged, with
signs of credit weakness continuing in the construction sector and emerging in
Non-accruals in the middle market have increased more than 17% in the
period spanning the last quarter of 2006 and the first quarter of 2007.
Non-accrual levels in the construction industry have increased more than 100%
over the same six-month period. Also within the construction industry, loans
past due 30 to 89 days have increased 5.8% from third-quarter levels.
"Given that growth in construction lending has comprised a substantial
share of total loan growth at many organizations for the past several years,
these trends continue to warrant close attention," said Maurice H. Hartigan
II, President and CEO, The Risk Management Association.
In addition, the real estate and rental & leasing sector shows emerging
credit quality deterioration. Non-accruals have risen more than 38% over the
six-month period, with loans past due 30 to 89 days rising nearly 22%.
The first quarter updates to the Risk Analysis Service reflect data for
middle market loans totaling approximately $600 billion in commitments and
$321 billion in outstandings provided by 16 top tier banks. The database is
estimated to include nearly half of all middle market commercial loans in the
These findings came from the RMA/AFS Risk Analysis Service, which enables
participating financial institutions to benchmark the risk profiles of their
middle market portfolios relative to those of their peers and the industry.
The service also allows participants to gain real-time insights into changing
credit quality and portfolio concentrations.
Recent enhancements to the Risk Analysis Service announced by RMA and AFS
include 1) an expanded risk rating scale capturing both probability of default
and loss given default metrics, 2) expanding the depth and granularity of
geographic coverage to allow state-level reporting 3) a dedicated reporting
module focused exclusively on commercial real estate loans, and 4) rolling out
the Service in Europe.
For additional information on the Risk Analysis Service, please contact
Suzanne Wharton at RMA at +1 (215) 446-4089 or Doug Skinner at AFS at +1 (484)
Founded in 1914, The Risk Management Association is a not-for-profit,
member-driven professional association whose sole purpose is to advance the
use of sound risk principles in the financial services industry. RMA promotes
an enterprise-wide approach to risk management that focuses on credit risk,
market risk, and operational risk. Headquartered in Philadelphia, PA, RMA has
3,000 institutional members that include banks of all sizes as well as nonbank
financial institutions. They are represented in the Association by 18,000 risk
management professionals who are chapter members in financial centers
throughout North America, Europe, and Asia/Pacific. Visit RMA on the Web at
Automated Financial Systems, Inc. (AFS) is an information technology and
software development company providing products and professional services
exclusively to the financial services industry. Its mission is to work with
forward-looking financial institutions to build the industry-leading global
franchise for lending processes based on a straight-through processing model
and on-demand technology and services. AFS assists clients by combining the
lending applications, execution expertise, and management information to
mitigate risk, reduce costs, and increase revenue. The firm is headquartered
in Exton, PA; its European subsidiary, Automated Financial Systems GmbH, is
located in Vienna, Austria. For further information, visit the AFS Web site at
For further information:
For further information: RMA Suzanne Wharton, Director, +1 215-446-4089
email@example.com or AFS Doug Skinner, Director, +1 484-875-1562