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Basel III’s implications for commercial real estate

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 After a lengthy comment period, the federal banking agencies released the US Basel III final rule on July 2, 2013. These rules revise regulatory capital requirements for all banks, savings associations, US bank holding companies with greater than $500 million in assets, and all savings and loan holdings companies. The rules implement the majority of the revisions of the global Basel III capital reforms, as well as relevant provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, in an effort to strengthen the quantity and quality of regulatory capital.

The new capital rules require banking organizations to maintain higher capital levels and enhance the definition of what can be included in the calculation of capital. The rules will have wide-reaching impacts on the banking industry, potentially altering the profitability and investment strategies for banking organizations and reassessing the allocation of capital. This paper focuses on the potential impact of the new regulatory capital rules on the commercial real estate industry, specifically for the borrowers of commercial mortgages who build, own and operate multifamily and commercial properties such as rental apartments, offices, shopping centers, hotels and warehouses.

Source : Ernst & Young

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Keywords : Ernst & Young