Federal banking regulators, including the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, have issued proposed new standards for bank capital, with comments due June 18. Included among the proposed rulemaking are an updated Basel III proposal and a standardized approach proposal, both with numerous implications for commercial real estate.
The CRE Finance Council (CREFC) notes that the Basel III proposal would revise the risk-based capital requirements applying to the largest, most internationally active firms and simplify the framework by subjecting firms to a single set of risk-based capital calculations. Meanwhile, “the standardized approach proposal would revise the U.S. standardized approach, which applies to most banks, to better align capital requirements with the risk of traditional lending activities,” according to CREFC.
In a statement, Bob Broeksmit, president and CEO of the Mortgage Bankers Association, calls the updated Basel III proposal “a pivotal step toward a more balanced and risk-aligned approach to capital standards affecting mortgage lending and commercial real estate finance. Capital rules are notoriously complex, but based on our initial review, the re-proposal incorporates several priorities long advocated by MBA, including more risk-sensitive capital requirements using loan-to-value ratios and the opportunity to consider the recognition of credit enhancements such as private mortgage insurance. It also takes important steps to reduce the punitive treatment of mortgage servicing rights and commercial real estate loans.”
CREFC and law firm Mayer Brown will hold a webinar on Wednesday at 3.p.m. EDT to delve into the bank capital proposals’ implications for commercial real estate. Click here to register.
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