US Agencies (FDIC, FED, and OCC) proposed to amend the regulatory capital rule to revise the definition of high volatility commercial real estate (HVCRE) exposures. The revision is intended 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. Comments must be received by 60 days after date of publication in the Federal Register. The changes, when finalized, would apply to all banking organizations subject to the capital rules of the agencies.
To facilitate consistent application of the revised HVCRE exposure definition, the US Agencies propose to interpret certain terms in the revised HVCRE exposure definition generally consistent with their usage in other relevant regulations or the instructions to the Consolidated Reports of Condition and Income (Call Report), where applicable, and request comment on whether any other terms in the revised definition would also require interpretation. In accordance with section 214 of EGRRCP Act, the US Agencies are proposing to revise the HVCRE exposure definition in section 2 of the capital rule to conform to the statutory definition of an HVCRE ADC loan. The revised definition of an HVCRE exposure would be applicable to the calculation of risk-weighted assets under both the standardized approach and the internal ratings-based approach.
Section 214 of EGRRCP Act amends the Federal Deposit Insurance (FDI) Act by adding a new section 51 to provide a statutory definition of a HVCRE ADC loan. The statute states the US Agencies may only require a depository institution to assign a heightened risk-weight to an HVCRE exposure, as defined under the capital rule, if such exposure is an HVCRE ADC loan under the EGRRCP Act. The statutory HVCRE ADC loan definition excludes any loan made prior to January 01, 2015. Section 214 became effective on enactment of the statute.
The US Agencies, in July 2018, issued an interagency statement, which provided information on rules and associated reporting requirements that the US Agencies jointly administer and that EGRRCP Act immediately affected. With respect to section 214, the interagency statement provides that institutions may use available information to reasonably estimate and report only HVCRE ADC loans in their Call Report and may refine these estimates in good faith as they obtain additional information. As an alternative to reporting HVCRE ADC loans, the interagency statement indicates that an institution may continue to report and risk-weight HVCRE exposures in a manner consistent with the current instructions to the Call Report, until the US Agencies take further action.
Comment Due Date: FR+60 Days
Keywords: Americas, US, Banking, HVCRE, Commercial Real Estate, EGRRCP Act, Call Report, US Agencies
Previous ArticleDNB Publishes IMV Benchmarking Report on Digital Reporting Portal
EIOPA submitted—to the European Parliament, the Council of the European Union, and EC—its 2020, fifth, and last annual report on long-term guarantee measures and measures on equity risk.
The BIS Innovation Hub Swiss Centre, SNB, and the financial infrastructure operator SIX announced the successful completion of a joint proof-of-concept (PoC) experiment as part of the Project Helvetia.
EBA published the final draft regulatory technical standards for calculation of own funds requirements for market risk, under the standardized and internal model approaches of the Fundamental Review of the Trading Book (FRTB) framework.
EIOPA published discussion paper on a methodology for the potential inclusion of climate change in the Solvency II (sometimes also written as SII) standard formula when calculating natural catastrophe underwriting risk.
EU published, in the Official Journal of the European Union, corrigenda to the Directive and the Regulation on the prudential requirements and supervision of investment firms.
MAS proposed amendments to certain regulations, notices, and guidelines arising from the Banking (Amendment) Act 2020.
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
RBNZ launched consultations on the scope of the Insurance Prudential Supervision Act (IPSA) 2010 and on the associated Insurance Solvency Standards.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.