September 18, 2018

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. 

 

Related Links

Comment Due Date: FR+60 Days

Keywords: Americas, US, Banking, HVCRE, Commercial Real Estate, EGRRCP Act, Call Report, US Agencies

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118