In an effort to prevent future runs on banks, a number of nations including all G-20 countries agreed to the Basel III regulatory framework in 2010, which strengthens bank capital requirements by increasing bank liquidity and decreasing bank leverage.
NAREIT supports strong capital requirements and liquidity ratios to insure the stability of financial institutions. However, as the United States moves to implement the Basel III framework, it is crucial that regulators minimize any negative consequences which impede institutions’ ability to raise capital and manage risk.
In October 2013, the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) issued proposed liquidity coverage ratios that go well beyond what was envisioned in Basel III.
NAREIT is concerned that the proposed liquidity coverage ratio rules will create significant disincentives for financial institutions to offer certain products and restrain the capital available to businesses. Additionally, the proposed rules would have harmful effects on the availability and cost of credit to commercial, multifamily, and single-family residential real estate borrowers and on the US economy in general.
NAREIT requests that the regulating agencies further study the effect of the proposed rules on real estate markets and the US economy before implementing any final rule. In addition, the regulating agencies should re-propose the capital rules following these empirical studies, as well as allow for a comment period. Any re-proposed capital rules should be more risk sensitive and more accurately reflect the actual risk of lending activities so that real estate borrowers have access to credit markets at fair prices.
STATUS: NAREIT and other concerned parties sent a letter to the Federal Reserve, FDIC, and OCC in January 2014.
- Industry Letter to Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of Currency on the Proposed Liquidity Coverage Ratio Rules - 1/31/14
- National Real Estate Organizations' Letter to Board of Governors of the Reserve System, the Office of the Comptroller of Currency and the Federal Deposit Insurance Corporation on the Proposal entitled “Liquidity Coverage Ratio: Liquidity Risk Measurement, Standards, and Monitoring" - 1/31/14
- Industry Letter to Senate Committee on Banking, Housing and Urban Affairs on the Proposed Basel III Regulations - 11/14/12
- Industry Letter to Federal Reserve, the Office of the Comptroller of Currency and the FDIC on the Proposed Basel III Capital Regulations - 10/22/12
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