Will banks become land developers?
Questions arise after regulators let Bank of America and PNC invest in large commercial properties.

NEW YORK (CNNMoney.com) - Bank of America and PNC Financial received approval from federal regulators to own large hotel and office properties, the Wall Street Journal reported.

The Office of the Comptroller of the Currency, the branch of the Treasury Department which regulates banks, recently allowed PNC (Research) to invest $122 million in a complex that will include a 30-story building for offices, a 150-room hotel and at least 30 condominiums.

Bank of America (Research), likewise, received permission to develop a 150-room, 15-story Ritz-Carlton hotel as part of its headquarters complex in Charlotte.

It's a move that could make it easier for banks to compete within the commercial real estate market. In the past, banks were only allowed to develop commercial real estate if the buildings were to be predominantly occupied by employees doing bank business.

Regulators traditionally limited banks to lending activities and prohibited them from owning and developing commercial real estate due to concern that a bank with a large concentration of loans could put its bank capital at risk if there was a sudden downturn in the real-estate market.

There were also concerns that banks, which have access to cheaper capital, could gain a monopoly in the market and control rents.

A spokesman for Bank of America told the Journal that the planned complex was approved because the bank will eventually comprise 50 percent of the hotel's annual occupancy.

But experts said that the OCC's new rulings have wider implications and could open the door for banks to become large players in the commercial real-estate market.


The OCC has tightened the reigns on exotic mortgages. Find out more hereTop of page

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