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Banking Regulators Proposing Easing Restrictions on Smaller Institution CRE Lending

March 23, 2017

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Banking Regulators Proposing Easing Restrictions on Smaller Institution CRE Lending

March 23, 2017 | by James Sprow | Blue Vault

Equity Raised

Continuing their efforts to reduce regulatory burdens while ensuring the safety and soundness of the nation’s financial institutions, member agencies of the Federal Financial Institutions Examination Council (FFIEC) on March 21, issued a joint report to Congress detailing their review of rules affecting financial institutions.

The review was conducted as part of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, and in conjunction with the National Credit Union Administration. (The 430-page report may not be viewed by cynics as reducing paperwork.)

Of interest to commercial real estate lenders, the report describes several joint actions planned or taken by the federal financial institutions regulators, including:

  • Simplifying regulatory capital rules for community banks and savings associations;
  • Increasing the appraisal threshold for commercial real estate loans.

On capital treatment, the report noted that agencies are considering amendments for community banks that would replace the existing framework’s treatment of high-volatility commercial real estate, a classification that requires a capital weighting of 150%. Regulators indicated the replacement would be “a more straightforward treatment” focused on acquisition, development or construction loans.

On appraisals, regulators said they are working on a proposal to increase the threshold for commercial real estate loans to $400,000 from $250,000. That proposal will include an information-gathering directive on potentially raising the $1 million threshold for real estate-secured business loans.

All of the proposals still need to be issued by regulatory agencies and then will be subject to the regular notice-and-comment periods.

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John E. Moriarty, ChFC
December 2015
February 3, 2016

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