Banking Brief: Financial Services Insights

While AI presents challenges and opportunities to all types of organizations, banks must be especially aware of the risks of unchecked AI use. A well-defined policy identifies permissible AI tools, establishes protocols for their use, enforces ethical safeguards, and ensures rigorous vetting of practices and procedures.

It is critical for commercial lenders and credit officers to recognize when the risk and complexity of a loan transaction exceeds the capability or intent of automated lending software. Here are five common triggers for when lenders should consider involving their counsel in all or part of a commercial lending transaction.

Banks own and operate a surprising amount of real estate for their branches and offices. There were over 77,500 bank branches in America as of the end of 2023. By comparison, McDonalds has about 13,000 stores in the US. That’s a lot of property, and it comes with a lot of legal considerations.

After an Event of Default occurs, it is important to understand the options available to the Lender other than demanding repayment or simply waiving the default.  A Forbearance Agreement allows the Lender to preserve, rather than waive, the default, while also obtaining key releases from the Borrower and allowing for strategic and customized modifications to the relationship.

Since early 2023, there has been consistent reporting of possible turbulence and increased default risk relating to commercial real estate loans. These concerns are driven by historic levels of maturing debt, which is in many cases secured by real estate that has taken a sharp hit in value.

Reports of potential trouble in commercial real estate lending have steadily increased this year.