Small banks face solvency risks

Falling commercial-property values are raising solvency risks for potentially hundreds of U.S. banks, according to a new report prepared for the National Bureau of Economic Research.

About 14% of all commercial real estate loans and 44% of loans on office buildings appear to be in “negative equity,” meaning the debt is now greater than the property value.

That raises the risk borrowers won’t repay because their stakes are wiped out, according to the report.

The distress “can induce anywhere from dozens to over 300 mainly smaller regional banks joining the ranks of banks at risk of solvency runs,” analysts wrote.

U.S. banks held about $2.7 trillion in commercial real estate debt at the end of the third quarter, according to the report by analysts from the University of Southern California, Northwestern University, Columbia University and Stanford University.

China halting rare-earth exports

China will halt the export of a range of rare-earth technologies, potentially making it harder for the U.S. and other western nations to bolster supplies of strategic raw materials.

Beijing put technology for making rare-earth metals and rare-earth magnets on a list of items that can’t be transferred overseas, according to a document from the Ministry of Commerce.

The move by the world’s dominant supplier of the minerals comes as its geopolitical rivals rush to cut reliance on materials produced in China.

From wire reportsOver the past three decades, China has built a dominant role in mining and refining rare earths, a cluster of 17 elements used in everything from wind turbines to military hardware and electric vehicles.

The new rules don’t affect shipments of rare-earth products themselves, but may be intended to frustrate efforts to develop the industry outside China.

Critical metals are coming under the spotlight more as Western nations increasingly view supplies as a matter of national security – especially as the global energy transition stokes fears of potential shortages in the future.

The U.S. is spearheading a drive to reduce China’s stranglehold over flows of minerals from rare earths to lithium and cobalt.