The Federal Reserve told bank examiners last month that banks were slow to take losses on their commercial real estate loans that have suffered as property values sink.
The Wall Street Journal initially reported the Fed's concern and Fed sources on Wednesday confirmed a presentation was made on the topic to regulators but described it as a training exercise for examiners about potential real estate issues.
The Journal report said the presentation was made on September 29 by Fed analyst K.C. Conway, a senior real estate analyst at the Atlanta regional Fed bank.
It suggested that regulators were preparing for a rerun of housing-related losses that plagued many banks after the residential property bubble burst, the newspaper said.
Fed sources said the intent was to provide examiners who work directly with banks with training they might need to evaluate emerging risks.
Conway's report predicted commercial real-estate losses would reach roughly 45 percent next year, the Journal said.
According to the paper, the report said that the most toxic loans on bank books were interest-only loans, which get no benefit from amortization, since it requires borrowers to repay interest but no principal.
The Journal said the report also stated that banks have been slow to absorb the losses on their loans, partly due to capital preservation concerns.
(Reporting by Biswarup Gooptu in Bangalore; Additional reporting by Glenn Somerville in Washington; Editing by James Dalgleish)