US Agencies (FDIC, FED, and OCC) issued a proposed rule on the treatment of loans that finance the development of land for purposes of the one- to four-family residential properties exclusion in the definition of high volatility commercial real estate (HVCRE) exposure in the regulatory capital rule. The proposal would clarify that loans that solely finance the development of land for residential properties would meet the revised definition of HVCRE, unless the loan qualifies for another exemption. The proposal applies to all banking organizations subject to the capital rules of the US Agencies. The comment period for the consultation ends on August 22, 2019.
This proposal expands on the notice of proposed rulemaking issued on September 28, 2018, which proposed to revise the definition of HVCRE exposure in the regulatory capital rule to conform to the statutory definition of ‘‘high volatility commercial real estate acquisition, development, or construction (HVCRE ADC) loan,’’ in accordance with section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act. The one- to four-family residential properties exclusion would not include credit facilities that solely finance land development activities, such as the laying of sewers, water pipes, and similar improvements to land. A facility that solely finances land development would be categorized as an HVCRE exposure, unless the exposure meets another exclusion from the revised HVCRE exposure definition.
Allowing banking organizations to apply a consistent definition of one- to four-family residential property and land development in this manner would simplify reporting requirements, reduce burden, and promote uniform application of the capital rule. The proposed rule requires changes to the Call Reports (FFIEC 031, FFIEC 041, and FFIEC 051), the Risk-Based Capital Reporting for Institutions Subject to the Advanced Capital Adequacy Framework (FFIEC 101), and the Consolidated Financial Statements for Holding Companies (FR Y-9C), which will be addressed in separate Federal Register notices.
Comment Due Date: August 22, 2019
Keywords: Americas, US, Banking, HVCRE, EGRRCP Act, Residential Real Estate, Regulatory Capital Rule, Reporting, Call Reports, FFIEC 101, FR Y-9C, US Agencies
Previous ArticleIMF Publishes Reports Under 2019 Article IV Consultation with Brazil
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).