In a speech at the CREF 24 conference in San Diego, Mortgage Bankers Association CEO Bob Broeksmit strongly opposed the proposed rules that would require bank lenders to maintain a thicker capital buffer. He argued that implementing these regulations would exacerbate ongoing real estate turmoil and have detrimental effects on bank lending and liquidity in the commercial property sector.
Brooksmit emphasized the large portion of commercial real estate lending that is managed by banks and how these regulations would affect them. He claimed that the capital banks are forced to hold under the new rules could be better utilized in areas in need of revitalization and to support job creation. Brooksmit cautioned that, instead, these funds would be left sitting idle, stifling the ability of banks to lend more.
Under Basel III proposals, banks with $100 billion or more in total assets would be required to increase their capital by an average of 20%. The largest banks would see a 19% rise in capital requirements, while banks with assets ranging from $100 billion to $250 billion would see a 5% increase, according to regulators.
Brooksmit also criticized the Basel III policy regarding defaulted commercial real estate loans, particularly the designation of a 150% risk weight to all loans associated with a borrower when a single loan defaults. He argued that each commercial financial transaction should be evaluated independently and not be tied to the performance of other loans under the same borrower.
The Basel III proposals have raised concerns from various groups, including consumer organizations, who fear that they will inhibit credit availability for underserved borrowers. If these rules are put into effect, it will be critical for banks and regulators to carefully assess their implications in order to address these concerns.
In conclusion, Mortgage Bankers Association CEO Bob Broeksmit expressed strong opposition against proposed rules that require bank lenders to maintain a thicker capital buffer as he believes it will negatively impact ongoing real estate turmoil and have detrimental effects on bank lending and liquidity in the commercial property sector.