U.S. banks may face new mortgage capital requirements under Basel regulations
PANews, February 16 – According to Jinse Finance, as the Federal Reserve is about to announce a highly anticipated bank capital proposal related to Basel III, U.S. lending institutions may face new mortgage requirements. Michelle Bowman, the Federal Reserve's chief banking regulator, stated that this new measure related to residential real estate will consider increasing the “risk sensitivity” of capital requirements for mortgages on banks’ balance sheets. One approach is to use the loan-to-value ratio to determine the applicable risk weight for residential real estate exposures, instead of adopting a uniform risk weight. “This change could better align capital requirements with actual risks, support on-balance-sheet lending by banks, and potentially reverse the trend of mortgage activity shifting to non-bank institutions over the past 15 years,” Bowman said.
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