The Basel III rules under consideration would create stricter capital requirements for large banks' residential mortgage portfolios, which trade groups oppose. Currently, first-lien loans are assigned lower risk weights, but the new proposals suggest higher risk weights based on loan-to-value ratios. Powell indicated a review of the Basel III rules is necessary, acknowledging pushback from the banking industry. Additionally, revised supplemental leverage ratio requirements are on the table, with changes emphasizing flexibility for banks during economic strain and evolving capital standards.
The proposal would reduce capital requirements for the largest U.S. banks to a range of 3.5% to 4.5%, allowing more flexibility in economic stress.
Powell acknowledged that current capital levels are well above international standards and said the Basel III rule requires a fresh start.
The draft proposal would impose risk weights of 40% to 90% on residential mortgages, roughly 20 percentage points higher than international norms.
The changes would redefine the supplementary leverage ratio as a buffer standard, allowing banks to use capital buffers during economic stress.
Collection
[
|
...
]