{"id":35198,"date":"2026-03-19T18:13:06","date_gmt":"2026-03-19T18:13:06","guid":{"rendered":"https:\/\/www.europesays.com\/ch\/35198\/"},"modified":"2026-03-19T18:13:06","modified_gmt":"2026-03-19T18:13:06","slug":"proposed-capital-rules-set-ltv-based-mortgage-risk-weights","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ch\/35198\/","title":{"rendered":"Proposed capital rules set LTV-based mortgage risk weights"},"content":{"rendered":"

Overall, the changes would reduce Tier 1 capital requirements by 4.8% for the largest banks (Categories I and II), 5.2% for Categories III and IV, and 7.8% for smaller institutions<\/a>.<\/p>\n

For mortgages, the Basel III and standardized approach proposals aim to boost incentives for origination and servicing<\/a> by increasing risk sensitivity, including eliminating the capital deduction for certain mortgage servicing assets (MSRs). Instead, MSRs would receive a 250% risk weight, with regulators seeking feedback on whether that level is appropriate.<\/p>\n

\u201cThis change would help promote bank participation<\/a> in mortgage businesses, while recognizing uncertainty regarding firms\u2019 ability to realize value from mortgage servicing assets over the economic cycle,\u201d the Fed Board stated.\u00a0\u00a0<\/p>\n

The proposal would also assign risk weights to residential real estate exposures based on loan-to-value (LTV) ratios. Risk weights would range from 20% for loans with a 50% LTV and up to 105% for those at 100% LTV but not dependent on real estate cash flows.<\/p>\n

\u201cTogether, these changes would strengthen our overall capital framework, which would remain robust under the new regime,\u201d said Michelle Bowman<\/a>, the Fed\u2019s vice chair for supervision, who led the effort. \u201cAn important benefit of these proposals is that they would reduce incentives for traditional lending activities \u2014 like mortgage origination, mortgage servicing, and lending to businesses \u2014 to migrate outside of the regulated banking sector.\u201d\u00a0<\/p>\n

Not all policymakers agreed. Fed Governor Michael S. Barr<\/a> voted against the proposals, calling the capital reductions \u201cunnecessary and unwise.\u201d Governors Stephen Miran<\/a> and Christopher Waller<\/a> supported the changes, with Waller saying they would improve risk sensitivity without unduly increasing requirements.<\/p>\n

Industry groups broadly welcomed the move. Mortgage Bankers Association (MBA) president and CEO Bob Broeksmit<\/a> said the Basel III proposal \u201cincorporates several priorities long advocated,\u201d including more risk-sensitive capital treatment and less punitive rules for MSRs and commercial real estate.<\/p>\n

\u201cMBA will review the proposal closely and looks forward to engaging in the formal comment process, including on key technical elements such as the appropriate capital treatment of mortgage servicing assets and the broader application of these reforms across the banking system,\u201d Broeksmit said.\u00a0<\/p>\n

A coalition of five trade groups \u2014 the Consumer Bankers Association, Bank Policy Institute, American Bankers Association, Financial Services Forum and National Bankers Association \u2014 also praised the proposal, calling it \u201can important step forward\u201d that could support lending while maintaining resilience.\u00a0<\/p>\n

\u201cToday\u2019s proposal marks an important step forward,\u201d the group said in a statement. \u201cWe welcome regulators\u2019 efforts to enable banks of all sizes to make more loans to American businesses and households, fueling economic growth while maintaining resilience in the banking system.\u201d<\/p>\n

Comments must be received on or before June 18, 2026.<\/p>\n","protected":false},"excerpt":{"rendered":"Overall, the changes would reduce Tier 1 capital requirements by 4.8% for the largest banks (Categories I and…\n","protected":false},"author":2,"featured_media":34062,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[2009,77,7540,4408,4349,7541,4409],"class_list":{"0":"post-35198","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-basel","8":"tag-banking","9":"tag-basel","10":"tag-basel-iii","11":"tag-federal-deposit-insurance-corporation","12":"tag-federal-reserve","13":"tag-hwmember","14":"tag-office-of-the-comptroller-of-the-currency"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/35198","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/comments?post=35198"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/35198\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media\/34062"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media?parent=35198"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/categories?post=35198"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/tags?post=35198"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}