New Regulations for Banks Pose Threat to Commercial Real Estate Lending, Says MBA

MBA CEO Bob Broeksmit Opposes Proposed Rules on Bank Capital Buffer and Their Impact on Commercial Real Estate Lending

In a speech at the CREF 24 conference in San Diego, Mortgage Bankers Association CEO Bob Broeksmit voiced strong opposition to proposed rules that would require bank lenders to maintain a thicker capital buffer. He argued that these regulations would exacerbate ongoing real estate turmoil and have detrimental effects on bank lending and liquidity in the commercial property sector.

Broeksmit emphasized the large portion of commercial real estate lending that is managed by banks, which would be affected by these regulations. He pointed out that the capital banks are forced to hold under the new rules could be better utilized in areas in need of revitalization and to support job creation. Broeksmit cautioned that, instead, these funds would be left sitting idle, stifling the ability of banks to lend more.

The proposed rules would require banks with $100 billion or more in total assets to increase their capital by an average of 20%. The largest banks would see a 19% rise in capital requirements, while banks with assets ranging from $100 billion to $250 billion would see a 5% increase, according to regulators.

Brooksmit also criticized the Basel III policy regarding defaulted commercial real estate loans, particularly the designation of a 150% risk weight to all loans associated with a borrower when a single loan defaults. He argued that each commercial financial transaction should be evaluated independently and not be tied to the performance of other loans under the same borrower.

The Basel III proposals have raised concerns from various groups, including consumer organizations, who fear that they will inhibit credit availability for underserved borrowers. If the rules are put into effect, it will be critical for banks and regulators to carefully assess their implications in order to address these concerns.

In conclusion, Broeksmit’s opposition to proposed rules aimed at increasing capital buffers for bank lenders highlights the potential negative impact on commercial real estate lending and liquidity. It remains uncertain how these rules will ultimately affect bank lending practices and borrowers’ access to credit.

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