- MBA CEO Bob Bruksmit said the Basel III proposals would cripple commercial real estate lending.
- The proposed regulations would require banks to maintain more capital to prevent loan losses.
- “Basel III could spell the end of bank real estate finance as we know it,” Burksmit said.
The head of the Mortgage Bankers Association said this week that proposed rules that would require lenders to maintain thicker capital buffers to protect against losses would intensify the ongoing real estate turmoil.
MBA CEO Bob Bruksmit slammed the proposal, saying it threatened to curb bank lending and constrain liquidity in the commercial real estate sector.
“They're called 'final stage proposals,' but only one of those words is accurate,” Burksmit said at the CREF24 conference in San Diego. “This could be the end of real estate finance.” on monday.
Mr. Burksmit highlighted that approximately 50% of commercial real estate lending is managed by supervised banks, and that the capital required to be held as part of the new rules is used to support areas that need revitalization and employment. suggested that it could be assigned to Creation.
“Rather, it would be left to do nothing. Washington, D.C. should be supporting more lending, not forcing them to lend less.”
The regulatory framework requires banks with more than $100 billion in total assets to increase their capital by an average of 20%, a move that helped banks withstand unexpected losses after the 2008 financial crisis. It is part of a broader effort by international governments to make this happen.
Once the system takes effect, capital requirements for the eight largest banks will increase by about 19%, while lenders with assets of $100 billion to $250 billion will see a 5% increase, regulators said.
Mr. Burksmit also slammed Basel III policies regarding commercial real estate loan defaults. Under this regime, if a single loan defaults, the regulator proposes to assign a 150% risk weight not only to that particular loan but to all loans related to the same borrower.
“This reflects the old adage that ‘one bad apple ruins the whole barrel.’ But while that may be true in other industries, it is completely irrelevant to our industry. “There is no such thing,” he said, adding that each commercial financial transaction is separate and distinct.
This is not the first time that Basel III has raised alarms, with some groups outside the banking industry also criticizing the proposal as being too stifling.
Consumer groups last month joined a chorus of bankers calling for the rejection of the Basel III proposal, saying it could hinder access to credit for underserved borrowers.
