Banks Eye Real Estate Ownership

In the U.S., national banking laws generally bar banks from owning and developing commercial real estate unless the buildings are predominantly occupied by employees doing bank business.

Although banks have historically been excluded from all but the financing end of real estate, they are trying to enter other aspects such as developing projects and competing in the housing market. (Regulators, wary of a high concentration of bank portfolio loans in the volatile commercial real estate market, fear a sudden economic downturn could impair bank capital.)

But recently the Comptroller of the Currency, a unit of the Treasury Department that regulates national banks, incrementally broadened its interpretation of permissible development activities. In postings on its Web site, it approved major real estate projects by two banks that go beyond the scope of typical bank real estate development.

The two major banks (PNC Financial Services Group of Pittsburgh and Bank of America of Charlotte) received the green light from regulators to develop and own large hotel and office properties, potentially opening the door wider for banks desiring to enter the commercial real estate business beyond their traditional role as lenders.