An article recently published by the Wall Street Journal shed light on a major development in the banking and real estate world. ("Banks Might Widen Real-Estate Role", Michael Schroeder, Wall Street Journal, January 9, 2006.) According to the article, two national banks received authorization by the Comptroller of the Currency, a branch of the Treasury Department, to develop and own large hotel and office properties. Some speculate that this development may allow banks to enlarge their real estate business beyond lending.

Generally, national banking laws prohibit banks from owning and developing commercial real estate unless the property is being used by bank employees carrying on bank business. Many banks have been attempting to enlarge the traditional roles they have played in commercial real estate. If permitted to enter into development projects and the housing market, banks would profit immensely.

While the banks were not identified by the Comptroller of the Currency, officials have said that the national banks given authorization are PNC Financial Services Group Inc. of Pittsburgh, Pennsylvania and Bank of America Corp., of Charlotte, North Carolina. According to the article, PNC will be investing $122 million in the development near its headquarters, which will include a thirty-story building for offices, a one hundred fifty room hotel and at a minimum, thirty condominiums. PNC employees are speculated to account for twenty-two percent of the development’s occupancy. PNC hopes that the development will "be a catalyst to attract additional downtown investment."

Bank of America is planning a large Ritz Carlton hotel as part of its headquarters in Charlotte. Bank of America has claimed that the bank will account for at least fifty percent of the annual hotel occupancy.

What will the impact be of these banking regulations being loosened? Some commentators feel that if national banks are permitted to directly compete against developers, the banks – through access to cheaper capital – will control rents, and thus control the market.