Excessive concentrations of commercial real estate loans have produced huge losses at banks and regulators need to set "hard limits" on CRE portfolios, according to Comptroller of the Currency John Dugan.

The federal banking regulator issued CRE concentration guidance on banks and thrifts in 2006 over the objections of the industry. The comptroller acknowledged his guidance has "obviously not worked" as well as he would have liked, considering the huge number of bank failures stemming from CRE loans — in particular construction and development notes.

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