The Federal Reserve approved changes to the market risk capital rule Thursday. As The Wall Street Journal reported, the changes would require small-sized lenders to comply with Basel III, which has caused strife among them.
The Fed said that “the final rule will better capture positions for which the market risk capital rule is appropriate, reduce procyclicality in market risk capital requirements, enhance sensitivity to risks that are not adequately captured by the current regulatory methodologies and increase transparency through enhanced disclosures.”
Meanwhile, the Mortgage Bankers Association sent a letter to federal regulators months ago asking them to modify those risk-based capital requirements for all banks. The agencies’ proposed simplified supervisory formula approach, it claimed, would have both intended and unintended consequences. Outgoing MBA president David Stevens wrote at the time that the SSFA “could hinder the return of private capital to the securitization market.”
“Further, some of the hardest hit markets that are still recovering from the economic crisis are real estate and real estate finance,” the association’s letter read. “The proposal could be especially harmful to these markets that would be greatly assisted by the return of private capital, including through securitization executions.”