没有消息就是坏消息：商业房地产的监控、风险和过时财务业绩

No News is Bad News: Monitoring, Risk, and Stale FinancialPerformance in Commercial Real Estate∗Samuel K. HughesJoseph B. NicholsFederal Reserve BoardApril 2025AbstractAs financial intermediaries, banks have a key role in producing information and managingthe risks on diverse loan portfolios. An important input into this process is ongoing collection offinancial performance from borrowers. Using supervisory data on commercial real estate loans(CRE), this paper studies relationships between the content and timeliness of borrower-reportedperformance, internal bank risk ratings, and subsequent loan performance. Banks heavily relyon borrower reporting when setting risk ratings, despite the fact that borrowers with stalefinancials are more likely to default.Although banks can generally be slow to update theirratings as information becomes more stale on average, we find causal evidence that they domonitor more intensively in response to loan, location and portfolio risks.Keywords: bank monitoring, risk management, commercial real estate mortgages, financial performancereportingJEL Classification: G14, G21, G32, R33∗Email:Hughes, samuel.k.hughes@frb.gov; Nichols, joseph.b.nichols@frb.gov.We thank Darren Aiello, CooperHowes, Mehdi Beyhaghi, Robert Kurtzman, David Glancy, Raven Molloy, Mark Paddrik, Teng Wang, Emily Ross-Johnston, Jason Alpert, and Mark Carey for their thoughtful feedback, as well as attendees of Office of FinancialResearch and Federal Reserve Board seminars, Boca Finance and Real Estate Conference, and AREUEA-ASSA 2025.The views expressed in this paper are solely those of the authors and do not necessarily reflect the opinions of theFederal Reserve Board, or the Federal Reserve System. All errors and omissions are our own.1 1IntroductionBanks have a key role in the financial system as intermediaries. Their role includes screening andsubsequently monitoring the creditworthiness of borrowers.Monitoring is essential for promptlyidentifying and managing risks and vulnerabilities as they emerge when the underlying collateral forloans is very sensitive to shifts in economic conditions (Weil 2024), as is the case with commercialreal estate (CRE) loans.Monitoring is partly based on acquiring regular reports on collateralperformance from borrowers and producing internal credit risk assessments.1not free, banks face both direct costs in terms of labor hours for loan officers and risk managers andindirect costs, including imposing higher reporting requirements from borrowers which could affectfuture bank-client relationships. Studying how banks optimize their monitoring given these costs isessential to understanding how systemically important banks learn about and manage risks duringtimes of rising financial stress.This paper aims to study borrower reporting of financial performance and how that reportingis used in banks’ ongoing monitoring of CRE loans.The paper has three main findings:first,banks heavily rely on borrowers’ performance reporting in their risk assessments; second, banksrespond relatively slowly to stale or delayed reporting despite a positive correlation between staleperformance and default risk; and third, banks adjust their information acquisition in response toloan- or portfolio-level shocks, demanding more timely reports when the banks are more concernedabout losses on CRE loans. This paper uses a loan-level dataset of commercial real estate mortgagesfrom large U.S. banks that tracks the performance of the loans, property-level financials, and thebanks’ estimate of the loans’ probability of default.The main findings are consistent with theories of financial intermediation in which banks’ compar-ative advantage over atomized investors is their ability to monitor loan performance (e.g., Diamond1984; Boyd and Prescott 1986). Large banks maintain significant research, servicing, and risk man-agement departments consistent with theory, all of which represents a direct cost of monitoring.Given banks’ growing analytical capacity and access to information, it is somewhat surprising howmuch banks still seem to rely on the traditional monitoring process of borrowers reporting theirperformance directly to the bank.These reporting requirements represent an indirect cost to thebank, as more onerous reporting requirements might encourage borrowers to consider lenders withmore relaxed monitoring. The information banks receive about performance appears to be valuableto them when assessing default risk, but how do they balance this benefit against both the directand indirect costs of producing it? Empirical results on adjustments in monitoring and informationproduction provide support for the view that acquiring more information is costly. Slow adjustmentsin bank risk ratings may be efficient given the need to trade off costs and benefits of monitoring onthe margin. Banks adjust their acquisition of information as risk exposures change, allowing themto hedge against losses or build up reserves in respons