Basel III: What You Need to Know
The Basel Capital Accords have been around for over two decades. The Group of Ten
countries first adopted the Basel Capital Accord in 1988 to ensure banks hold more
capital for high risk loans under the presumption that it would prevent catastrophe
global economic failures. There have been several stages of the Basel Capital Accord,
including Basel II and Basel III.
Three U.S. federal agencies — Office of the Comptroller of the Currency,
Federal Reserve System, and the Federal Deposit Insurance Corporation — have
proposed rules based off Basel III and reforms required by the Dodd-Frank Act. CCIM
Institute was among several commercial real estate organizations that submitted a
comment letter (PDF) on the proposed rules.
Our concerns within the comment letter include the calculation of risk-based capital
requirements and the amount of time allowed to review the Basel III proposed rules.
Changes to high-volatility commercial real estate loans would impact loan availability.
Further, small and large banks would have to take part in the weighting and calculation
of risk-based capital requirements. Additionally, there are over 700 pages to review by
early September 2012, which is not adequate for comprehensive review. This is
particularly alarming with the potential impact these proposed rules may have on
financial institutions, the real estate sector, and an uncertain economy.
UPDATE: Comment period has been extended until October 22,
UPDATE: On November 9, 2012, the banking agencies proposing Basel III rules
announced the rules will NOT become effective January 1, 2013.
UPDATE: CCIM Institute participated in two coalitions submitting comments to
the Senate Committee on Banking, Housing and Urban Affairs in preparation for the
hearing titled "Oversight of Basel III: Impact of Proposed Capital Rules" on Nov. 14,
2012. Our concerns continue to be the unintended consequences for high proposed risk
weights for certain commercial asset classes. Review the comment letters, NAR Basel
III Letter and U.S. Chamber of Commerce Basel III Letter. On Nov. 28, CCIM and several
other organizations submitted comments to leaders of the Subcommittee on Insurance, Housing and Community Opportunity, prior to
their hearing on Basel III.