Such statistics are mind boggling – Banks are lending out more than their capital to one segment.  It actually doesn’t matter which segment;  just that the notion of diversification relative to their capital base is lost.

In laymans terms this means, that in the event of a housing, ergo, construction economy pull back, that Banks will go under.  Its the equivalent of personally borrowing more than you have in other assets, then losing your job. 

Calculated Risk: Rising Delinquencies for Construction Loans

Figures compiled by the Federal Deposit Insurance Corporation … show that both midsize and small banks had construction loans outstanding that were greater than their total capital. A decade ago, such loans were equal to only a third of capital for those banks.

All the work on Basel, and liquidity requirement for Banks is irrelevant, if they are allowed, and more pointedly, choose to make such rash investment choices. 

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