Risk-based capital

A proposed update to Basel III capital rules from federal banking regulators does not specifically include mortgage insurance as a factor in determining the risk weight for a mortgage loan held on a bank's balance sheet. Industry experts say it should.

Federal regulators issued proposals Thursday to implement the final elements of the Basel III accords, adjust the global systemically important bank surcharge and implement standardized approaches for risk-weighted assets. The changes would reduce capital requirements for banks of all sizes affected by the rules.

Federal Reserve Vice Chair for Supervision Michelle Bowman outlined upcoming changes to the bank regulatory capital framework in a speech Thursday, focusing on streamlining bank capital requirements through Basel III and global systemically important bank surcharge rules.

Federal Reserve Vice Chair for Supervision Michelle Bowman said in comments Wednesday that the central bank plans to publish its Basel III endgame capital proposal for public comment before the end of March.

Federal Reserve Vice Chair for Supervision Michelle Bowman said in a speech Monday morning that the central bank will introduce two capital proposals that she said are aimed at boosting banks' role in the mortgage market.

A Government Accountability Office report warns the Office of the Comptroller of the Currency to clarify which records from the Basel Committee on Banking Supervision should be treated as federal records and thus retained according to the Federal Records Act.

A big part of the trouble with the RBC rule is that Ginnie Mae is essentially using its limited legal authority to qualify government issuers to impose sweeping changes on how IMBs operate writes the Chairman of Whalen Global Advisors.

Europe's top finance ministers are questioning the U.S.'s commitment to the global capital standards. The mistrust could have consequences for international regulatory efforts.

The Federal Reserve chair said he supports the revised proposal outlined by Vice Chair for Supervision Michael Barr and said the new proposal would get a vote by the full Board of Governors early next year.

In congressional testimony, the Federal Reserve chair said the Board of Governors is processing the comments on its capital reform proposal. Putting forth an entirely new proposal is "very plausible."

Federal Reserve Gov. Michelle Bowman, a vocal opponent to the proposed risk capital rules for large banks, said she still sees a path forward for capital reform.

Federal Reserve Vice Chair for Supervision Michael Barr said feedback received will be incorporated into the final version of the capital reform rule.

Regulators will now accept feedback until Jan 16, 2024 — a six-week extension — concurrent with a Federal Reserve effort to gather additional information about the potential implications of the proposed capital changes.

Ginnie Mae has constructed a perfectly counter-cyclical capital regime that would crush the government loan market if left unaltered, the chair of Whalen Global Advisors writes.

The GSEs began sharing their risk with the private market in new ways during conservatorship, and the Federal Housing Finance Agency’s proposed capital framework currently discourages the use of those strategies. Industry leaders voiced concerns in a FHFA listening session this week.

The Federal Housing Finance Agency's proposal could undermine the companies’ mission to support the housing market and penalize consumers in underserved communities, industry and consumer groups say.

The FHFA’s proposal is intended to strengthen Fannie Mae and Freddie Mac, but many experts warn that it could boost guarantee fees for lenders that they say may be passed on to borrowers.

Some observers wonder if proposed regulatory targets for Fannie Mae and Freddie Mac will stoke concerns about low shareholder returns. But others suggest those fears are unfounded.

The much-anticipated proposal, which would not go into effect until after Fannie Mae and Freddie Mac are privatized, reflects Director Mark Calabria’s aggressive efforts to get the companies on a strong financial footing.

And the government-sponsored enterprises could hold initial public offerings in 2021 or 2022 to ensure they hold adequate capital, FHFA Director Mark Calabria said.