Category: Capital & Credit

Roundtable Backs DOL Proposal to Expand 401(k) Access to Alternative Assets

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The Real Estate Roundtable (RER) submitted comments this week supporting the Department of Labor’s (DOL) proposed rule to clarify fiduciary standards for including alternative assets, such as real estate, in 401(k) retirement plans. In the letter, RER affirmed that the proposal would expand investment choice, improve diversification, and provide retirement savers with access to asset classes that have long been available to institutional investors. (Letter, June 1)

Why It Matters

  • RER’s comments respond to the DOL’s proposed rule implementing the August 2025 Executive Order, “Democratizing Access to Alternative Assets for 401(k) Investors,” which seeks to clarify fiduciary obligations when plan sponsors offer investment options that include alternative assets such as private equity, real estate, private credit, and infrastructure investments. (Letter, June 1)
  • The DOL proposal would also establish a process-based safe harbor under the Employee Retirement Income Security Act (ERISA), helping reduce regulatory uncertainty and litigation risk that have discouraged many employers from offering alternative investment options in defined-contribution retirement plans. (DOL Press Release, March 30)
  • More than 90 million Americans participate in 401(k)-style retirement plans but generally lack access to the same alternative investment opportunities available to defined-benefit plan portfolios, such as pensions and other institutional investors. (Letter, June 1)

RER Advocacy

  • RER’s letter argues that the DOL’s rule appropriately clarifies that ERISA gives fiduciaries discretion and flexibility to determine when alternative investments are suitable for plan participants. (Letter, June 1)
  • RER also emphasized that defined-benefit pension plans that maintain allocations to private equity and other alternative assets have historically outperformed many defined-contribution plans, giving institutional investors access to diversification and return opportunities generally unavailable to retail retirement savers. (Letter, June 1)
  • The proposal would help level the playing field between 401(k) investors and defined-benefit plans by allowing fiduciaries to consider a broader range of investment options when they determine such investments are appropriate for plan participants. (Letter, June 1)
  • “RER believes that this rulemaking represents an important step toward restoring the principle that retirement savers, not regulators, determine how they invest,” the letter stated.

State of Play

  • The proposal has drawn mixed reactions on Capitol Hill.
  • Senior congressional Democrats, including House Education and Workforce Committee Ranking Member Bobby Scott (D-VA), Senate HELP Committee Ranking Member Bernie Sanders (I-VT), and Senate Banking Committee Ranking Member Elizabeth Warren (D-MA), urged DOL this week to withdraw the proposal. (Letter, June 1)
  • The Democratic lawmakers argued that expanding access to private equity, cryptocurrency, and other alternative investments could expose retirement savers to “risky, complex, and expensive” investments and weaken fiduciary protections for retired savers. (Letter, June 1)
  • Meanwhile, a group of 21 Senate Republicans, including Senate Banking Chair Tim Scott (R-SC) and HELP Chair Bill Cassidy (R-LA), submitted a letter backing the proposal, arguing that it “has the potential to materially improve long-term retirement outcomes for American workers.” (PoliticoPRO, June 2)
  • A separate group of 25 House Republicans, including House Budget Chair Jodey Arrington (R-TX) and House Financial Services Subcommittee on Financial Institutions and Monetary Policy Chair Andy Barr (R-KY), also submitted a letter advocating for the policy. (PoliticoPRO, June 2)
  • In a March press release, then-U.S. Secretary of Labor Lori Chavez-DeRemer explained, “This proposed rule will show how plans can consider products that better reflect the investment landscape as it exists today. This greater diversity will drive innovation and result in a major win for American workers, retirees, and their families.” (DOL Press Release, March 30)
  • SEC Chairman Paul S. Atkins echoed former Secretary Chavez-DeRemer’s remarks, saying, “Americans’ ability to participate more fully in innovation and economic growth through well-diversified long-term investments is a vitally important priority for effective retirement planning.” (DOL Press Release, March 30)

What’s Next

  • The public comment period closed on June 1, and DOL is reviewing stakeholder feedback before deciding whether to finalize the rule later this year.

RER will continue to engage with policymakers on retirement investment policy and support reforms that expand capital formation, balance investment flexibility with appropriate oversight, and provide American workers with broader opportunities to build long-term wealth.

The Department of Labor Proposes 401(k) Alternative Investment Rule

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The Department of Labor (DOL) proposed a new rule this week that would make it easier for 401(k) plans to offer investment options with exposure to alternative assets, including private equity, real estate, digital assets, and other nontraditional products—if fiduciaries follow a prudent, process-based framework. The proposal stems from President Trump’s Aug. 7, 2025 Executive Order directing regulators to expand access to alternative assets in defined contribution retirement plans. (DOL News Release, March 30)

Proposed Rule

  • The proposed rule would clarify fiduciary duties under the Employee Retirement Income Security Act (ERISA) and establish a safe harbor for selecting designated investment alternatives, including asset allocation funds that contain alternative assets. (PoliticoPro, March 30)
  • DOL says the rule is intended to reduce regulatory uncertainty and litigation risk that have discouraged plan sponsors from offering broader exposure to private markets and other alternatives in 401(k) plans, even though such investments are not expressly prohibited today.
  • Under the proposal, fiduciaries would need to evaluate factors such as performance, fees, liquidity, valuation, benchmarks, and complexity through an objective and analytical process. (DOL News Release, March 30)

Background

  • While alternative investments have long played a role in defined-benefit plans such as pensions, fiduciary obligations and litigation concerns have made it more difficult to include them in participant-directed defined contribution plans like 401(k)s.
  • Since the Executive Order, regulators and administration officials have signaled growing support for expanding access to alternative investments—including real estate—while emphasizing the need for appropriate guardrails. (Reuters, March 30)

What to Watch

  • The proposal would mark a meaningful shift in the federal government’s approach to alternative investments in retirement plans, particularly by replacing a more cautious posture with a framework centered on fiduciary process rather than asset-class restrictions. (CNBC, March 30)
  • The rule could have important implications for real estate and other alternative asset managers if it leads to broader access to private-market exposure through participant-directed retirement plans.
  • The proposal does not endorse any specific asset class, and fiduciaries would still be expected to determine whether a particular investment is appropriate for plan participants.

What’s Next

  • The proposal is subject to a 60-day public comment period, with DOL signaling it hopes to finalize the rule by year’s end.

Comments are due on June 1, 2026.  RER is working on comments and welcomes input from members. 

Federal Regulators Release Revised Basel III Endgame Proposal

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The Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) on Thursday unveiled a substantially revised Basel III Endgame proposal, replacing the 2023 framework that drew broad industry opposition. (WSJ | Fed Board Memo, March 19)

State of Play

  • The revised proposal would reduce capital requirements for the largest U.S. banks by 2.4% overall. (PoliticoPro, March 19)
  • The package would also replace the dual-track capital framework for the largest banks with a single approach, revise the G-SIB surcharge, and lower risk weights for mortgages and mortgage servicing assets. (ABA Banking Journal, March 19)
  • Regulators said the changes are intended to align capital with risk better, preserve safety and soundness, and support lending and other financial intermediation activities across economic conditions. (Fed Board Memo, March 19)
  • The interagency proposal would raise capital requirements by an estimated 1.4% under the revised Basel framework, but that increase would be more than offset by a 3.8% reduction in the G-SIB surcharge for the largest U.S. banks, for a net 2.4% decline overall.
  • Midsize banks would be allowed to decrease their capital buffers by an average of 5.2%, including stress-test revisions, and smaller banks by 7.8%. (WSJ, March 19 | AAF, March 20)
  • Regulators said the revised framework would also better support traditional lending and reduce incentives for activity to migrate outside the regulated banking system, including through lower risk weights for mortgages and mortgage servicing assets. (OCC News Release, Mar. 19)

Why It Matters

  • For commercial real estate, the reset could ease regulatory pressure that threatened to constrain credit for real estate lending, mortgage activity, and other capital-intensive transactions.
  • “Lowering the amount of capital held by banks would give them more money to deploy into the economy, potentially boosting growth,” said Federal Reserve Vice Chair for Supervision Michelle Bowman, who led the central bank’s efforts to craft the proposal. (Fed Press Release, March 19)
  • House Financial Services Committee Chairman French Hill (R-AR) and Subcommittee on Financial Institutions Chairman Andy Barr (R-KY) said the agencies had moved toward a “more balanced Basel III framework,” adding that right-sized capital standards are critical to preserving lending capacity, competitiveness, and access to credit. (Reps. Hill, Barr Statement, March 19)

Roundtable Advocacy

  • The Real Estate Roundtable (RER) has consistently opposed the original Basel III proposal, citing its potential negative impact on available credit capacity for commercial real estate transactions, market liquidity, and economic growth. (Roundtable Weekly, Nov. 2023; Jan. 2024; Mar. 2024)
  • In December, RER and a coalition of leading business trade organizations urged prudential regulators to examine and modernize large bank capital requirements so they continue supporting consumers, businesses, and the broader U.S. economy. (Letter, Dec. 2) (Roundtable Weekly, Dec. 5)
  • The coalition letter underscored the negative economic impacts of inappropriately calibrated capital rules, highlighted risks to American competitiveness, and commended ongoing agency efforts to improve the framework. (Roundtable Weekly, Feb. 20)

The agencies will accept comments on the proposed rules until June 18, and RER’s Real Estate Capital Policy Advisory Committee (RECPAC) looks forward to members’ input as it prepares comments on the proposal.

The Fed Signals Capital and Liquidity Reforms as Basel III Endgame Work Continues

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The Federal Reserve is moving to recalibrate key elements of the U.S. bank capital and liquidity framework, including Basel III Endgame implementation and targeted mortgage-capital adjustments. The Fed’s Vice Chair for Supervision, Michelle Bowman, signaled this week that reforms should support market liquidity and credit availability while maintaining safety and soundness. (FinancialTimes, Feb. 16)

State of Play

  • Bowman told bankers at the ABA’s 2026 Conference for Community Bankers this week that the Fed will soon seek comment on two proposals to encourage banks to re-engage in mortgage origination and servicing, within the Basel framework. (Speech, Feb. 16)
  • Bowman pointed to a “concerning trend” of mortgage activity to nonbanks. She cited data showing banks originated roughly 60% of mortgages in 2008 and serviced roughly 95% of outstanding balances; by 2023, those figures had fallen to about 35% and about 45%, respectively. (HousingWire, Feb.16).
  • The mortgage capital discussion comes as the Trump administration seeks tools to bolster affordability and credit availability, including directing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities. (Reuters, Feb. 18)
  • “By creating a resilient mortgage market that includes robust participation from all types of financial institutions, we can deliver affordable credit and high-quality servicing to borrowers regardless of economic conditions,” Bowman said. (Speech, Feb. 16)
  • Bowman said the shift has implications for the banking industry, mortgage market stability, and consumers.

Basel III Endgame

  • In separate remarks on Feb. 19, Bowman said regulators are modernizing the “four pillars” of the capital framework—stress testing, supplementary leverage ratio (SLR), Basel III Endgame, and the G-SIB surcharge—with a focus on market liquidity and affordable homeownership alongside safety and soundness. (Speech, Feb. 19)
  • Bowman said the Basel effort is “bottom-up,” not “reverse engineered,” arguing that finalizing Basel III would reduce uncertainty and provide clarity for bank capital standards. (PoliticoPro, Feb. 19)
  • The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) recently submitted their Basel-related proposals to the Office of Management and Budget (OMB) for review—an important step in the interagency process. (Reuters, Feb. 13)
  • The Trump administration regulators have said they plan to rewrite liquidity rules, though details have not been released. (PoliticoPro, Feb. 19)
  • Bowman’s recent remarks are the clearest signal yet of how the Fed may recalibrate the U.S. approach to Basel capital implementation, following industry concerns that earlier proposals could constrain credit and further shift activity to less-regulated lenders.

Roundtable Advocacy

  • In December, RER and a coalition of leading business trade organizations urged prudential regulators to examine and modernize large bank capital requirements so they continue supporting consumers, businesses, and the broader U.S. economy. (Letter, Dec. 2)
  • The coalition letter underscored the negative economic impacts of inappropriately calibrated capital rules, highlighted risks to American competitiveness, and commended ongoing agency efforts to improve the framework. (Roundtable Weekly, Dec. 5)

What’s Next

  • The Fed is expected to issue the mortgage-capital proposals for public comment before any changes take effect, while agencies continue advancing a revised Basel III Endgame package.
  • Bowman is expected to testify next Thursday alongside the heads of the OCC, the FDIC, and the National Credit Union Administration at a Senate oversight hearing. (WSJ, Feb. 19)

As regulators advance both targeted mortgage capital adjustments and a revised Basel III Endgame proposal, RER will remain engaged to ensure capital reforms do not constrain credit flows essential to commercial real estate, economic activity, and long-term investment, while protecting safety and soundness.

House Passes Bipartisan FSOC Reform Bill

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The House passed six bipartisan bills from the House Financial Services Committee (HFSC) this week, including the Real Estate Roundtable (RER)-backed Financial Stability Oversight Council (FSOC) Improvement Act of 2025. (H.R. 3682). (Press Release, Feb 9)

 FSOC Improvement Act of 2025

  • The House passed the bill unanimously by voice vote after the HFSC approved H.R. 3682 during its Sept. 16, 2025, markup.
  • The bill would reform FSOC by strengthening transparency, accountability, and procedural safeguards in its decision-making process. It is intended to bolster due-process protections, improve interagency coordination, and ensure designations are based on rigorous analysis.
  • The bill would require FSOC to consult with a company and its primary regulator before designating a nonbank as a Systemically Important Financial Institution (SIFI). (Letter, Oct. 28)

RER Advocacy

  • RER and coalition partners sent a letter of support for H.R.3682 in October 2025, emphasizing an activities-based approach to systemic risk, transparent cost-benefit analysis, and clear procedural guardrails to improve predictability and interagency coordination. (Roundtable Weekly, Oct. 31)
  • The October letter built on a July 2025 coalition letter urging FSOC to rescind its 2023 interpretive guidance and reinstate its 2019 framework, citing due-process protections and stronger coordination with primary regulators. (Roundtable Weekly, July 18)
  • RER has consistently urged regulators to focus on systemic-risk activities—not broad entity designations that can fuel regulatory overreach and create unintended consequences for liquidity, capital formation, and credit availability.

What’s Next

The bill now moves to the Senate Banking Committee for consideration.

FSOC Hearing Highlights Nonbank Oversight as CRE Reacts to Fed Chair Nomination

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This week, the House Financial Services Committee (HFSC) and Senate Banking, Housing and Urban Affairs Committee held hearings with Treasury Secretary Scott Bessent to review the Financial Stability Oversight Council’s (FSOC) 2025 Annual Report. Lawmakers used the session to raise broader concerns about financial regulation, capital formation, and credit availability, including attention on FSOC’s role in banking regulation.

FSOC and Regulatory Direction

  • In his testimony, Sec. Bessent described a recalibrated approach at FSOC that focuses on identifying specific risky activities, rather than broadly regulating entire firms or sectors. He criticized prior “regulation by reflex” and stated that FSOC should avoid labeling wide swaths of the financial system as vulnerable, absent clear, material risk. (Watch Hearing)  
  • “FSOC should… work with its members to support efforts to avoid or pare back existing regulation that stifles pro-growth lending, capital formation, and innovation. And the best way to achieve these goals is by centering economic growth and economic security at the heart of FSOC’s agenda,” Sec. Bessent said. (Politico Pro, Feb. 4)
  • Several exchanges focused on FSOC’s authority to designate nonbank financial companies as Systemically Important Financial Institutions (SIFIs). Sec. Bessent confirmed a preference for an activities-based framework, signaling openness to clearer standards and restraint in the use of entity-based designations. (Watch Hearing)  
  • Sec. Bessent added that he would propose new nonbank guidance later this year, and that he supports higher deposit insurance to protect small banks’ competitiveness against larger institutions. (Politico Pro, Feb. 4)
  • He also supported HFSC Chairman French Hill’s (R-AR) community banking legislative package. He emphasized that small and community banks need tailored capital and risk standards to succeed. (American Banker, Feb. 4)
  • Democratic lawmakers warned that easing regulatory scrutiny could increase systemic risk and repeat conditions that preceded the 2008 financial crisis, with HFSC Ranking Member Maxine Waters (D-CA) arguing that FSOC should play a stronger role in identifying risks across the financial system, including among nonbank entities. (Watch Hearing)

Affordability and Tariffs

  • During the HFSC hearing, Ranking Member Waters pressed Sec. Bessent on whether the administration’s tariffs have contributed to persistent inflation. Sec. Bessent rejected that characterization and disputed claims that he had previously warned investors tariffs were inflationary. (American Banker, Feb. 4)
  • Ranking Member Waters also linked tariffs directly to worsening housing affordability, pointing to duties on key construction inputs such as lumber, steel, and appliances. (American Banker, Feb. 4)
  • While Democrats argued that tariffs and high prices continue to burden consumers, Sec. Bessent cited a Wharton study that points to immigration-driven demand as a contributing factor to higher housing costs. (CNBC, Feb. 4)

Roundtable Advocacy

  • The Real Estate Roundtable (RER) and coalition partners have supported the Financial Stability Oversight Council Improvement Act (H.R.3682), which would require FSOC to consult with a company and its primary regulator before designating a nonbank as a SIFI. (Letter, Oct. 28)
  • The bill is intended to strengthen due-process protections, improve interagency coordination, and ensure designations are based on rigorous analysis.
  • RER has consistently urged regulators to focus on activities that pose genuine systemic risk, rather than imposing broad designations that can create regulatory overreach and unintended consequences for credit markets. (Roundtable Weekly, Oct. 31)

CRE’s Reaction to Fed Chair Nomination

  • Last week, President Donald Trump announced his nomination of Kevin Warsh, a former Federal Reserve Governor, to succeed Fed Chair Jerome Powell. (Axios, Jan. 30)
  • As industry media outlets have reported, commercial real estate and finance leaders have broadly welcomed the nomination, citing Warsh’s experience from the financial crisis and his capital markets expertise. (Bisnow, Jan. 30)
  • “Kevin Warsh is a smart, thoughtful, and experienced nominee. His deep understanding of monetary policy and financial markets would help maintain and strengthen market confidence at a time when economic certainty matters most,” Jeffrey D. DeBoer, RER President and CEO, said.
  • Bob Broeksmit, President and CEO of the Mortgage Bankers Association, said in a statement that Warsh’s prior service on the Fed board gave him a reputation as “a prudent, thoughtful voice on monetary policy.”(ConnectCRE, Jan. 30)
  • CRE finance experts noted that while Warsh’s nomination could raise expectations for near-term rate cuts, uncertainty surrounding the confirmation process and Fed independence may keep long-term Treasury yields, as well as permanent financing costs, elevated. (ConnectCRE, Jan. 30)

RER remains committed to engaging policymakers on FSOC reform and related financial regulations to ensure oversight frameworks support capital formation, liquidity, and economic growth.

RER Backs Community Banking Reform to Expand Credit and Local Investment

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The Real Estate Roundtable (RER) submitted a letter of support this week for the Main Street Capital Access Act (H.R. 6955). RER praised the bill as a long-overdue step toward “common sense tailoring” of bank regulation in comments sent to House Financial Services Chairman French Hill (R-AR) and Financial Institutions Subcommittee Chairman Andy Barr (R-KY). (Letter, Jan. 8)

Background

  • Introduced on Jan. 7, the Main Street Capital Access Act looks to ease regulations on small and mid-size banks and increase their access to capital.  
  • The measure bundles 29 bills that advanced through the full House Financial Services Committee last year, several of which received overwhelming bipartisan support.
  • Chairman Hill said, “Over the past year, the Subcommittee on Financial Institutions under Chair Barr’s leadership has worked tirelessly to examine outdated regulations, listen directly to small businesses, and confront barriers to access capital for small and mid-sized banks. I am proud to introduce the Main Street Capital Access Act with Chair Barr to reinvigorate our community banks and return commonsense back to Main Street.”
  • Chair Barr will be a featured speaker at RER’s State of the Industry Meeting next week.
  • The package includes legislation that promotes new bank formation, expands local community access, tailors bank regulation, fosters fair and transparent bank supervision, and supports competition, innovation, and responsible bank partnerships.

Roundtable Advocacy

  • RER’s letter emphasizes that community and regional banks are vital to the financing ecosystem for commercial and residential real estate, and therefore play a key role in addressing the nation’s housing shortage.
  • “The Main Street Capital Access Act will help revitalize communities across the nation by encouraging local bank formation and enhancing credit capacity,” wrote RER President and CEO Jeffrey DeBoer. “By easing outdated regulatory burdens for community banks, it will help unlock more capital for housing and small businesses and permit Main Street community lenders to focus on serving families and local economies, making life more affordable for Americans.”
  • DeBoer also underscored the impact of the decline in new bank formation in recent years. “This lack of ‘de novo’ or ‘new’ bank activity, coupled with ‘banking deserts’ that are common in rural areas, has led to higher costs for households and less access to capital and investment for small and medium-sized businesses,” DeBoer added.

Why It Matters

  • Community banks serve as a primary capital source for local housing and commercial real estate projects, particularly in underserved markets where larger institutions may have little presence.
  • RER has consistently advocated for right-sized financial regulation that promotes liquidity in the CRE market while maintaining safety and soundness in the banking system. The Main Street Capital Access Act aligns with this principle by streamlining oversight and promoting innovation in the small-bank sector.

Next Steps

RER will continue to work with Congress and the administration to advance policy measures that encourage capital formation, enhance credit capacity, support housing production, and foster economic development in communities around the country.

Fed Cuts Rates Again Amid Split Outlook; Hearing Targets Capital Rules

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The Federal Reserve on Wednesday cut its benchmark interest rate by 25 basis points for the third straight meeting, lowering the federal funds target range to 3.50-3.75 percent. Fed Chair Jerome Powell emphasized that while policy is easing, the bar for additional reductions in early 2026 remains high.

Fed’s Decision

  • The Federal Open Market Committee (FOMC) vote was 9-3, with two policymakers preferring to hold rates steady and one seeking a deeper cut. (CNBC, Dec. 10)
  • Chair Powell said policy is “well positioned,” but stressed decisions are not on a preset path, citing mixed inflation signals and slowing but still resilient labor conditions. (Watch Press Conference)
  • The Chair noted that the latest projections show only one rate cut expected in 2026, signaling a potential pause in additional easing absent clearer labor and inflation trends.
  • Officials highlighted labor market softening as a key factor, with Chair Powell acknowledging it’s a “labor market that seems to have significant downside risks,“ even as inflation remains elevated.
  • He also expressed some optimism about growth, with the FOMC raising its outlook for 2026 GDP by half a percentage point, to 2.3 percent. (CNBC, Dec. 10)

Housing and CRE Outlook

  • Rate cuts alone won’t materially reprice CRE, as valuations and returns depend on multiple factors beyond monetary policy, and CRE has historically performed well even in higher-rate environments, industry analysts noted. (Connect CRE, Dec. 10)

  • Multifamily and industrial have already benefitted from the current rate environment, with multifamily development borrowing costs falling from 7.5-9 percent to ~6-7.25 percent and industrial cap rates expected to compress modestly. (Connect CRE, Dec. 10)

  • Commercial Mortgage-Backed Securities refinancing challenges remain acute, as lenders are unwilling to extend maturities without new borrower equity or substantive restructuring proposals. (Commercial Observer, Dec. 10)

Congressional Oversight & Capital Framework

  • At a House Financial Services Subcommittee hearing Thursday, witnesses largely urged regulators to calibrate the emerging Basel III Endgame proposal to support competitiveness, credit availability, and economic growth. (Watch Hearing)
  • Andrew Olmem (Partner, Mayer Brown) emphasized that capital decisions are policy choices: “Improperly calibrated requirements can reduce credit, raise borrowing costs, and slow wealth creation.”
  • GOP leaders on the subcommittee stressed the need for a tailored, data-driven framework that avoids the “gold-plated” standards identified by the Basel Committee.
  • Subcommittee Chair Andy Barr (R-KY) stated that the initial Basel III Endgame proposal was “deeply flawed” and pointed out that it has received bipartisan criticism. (Rep. Barr Press Release, Dec. 11)  

RER Advocacy

  • Thursday’s hearing was the latest in a series of recent steps policymakers have taken toward re-evaluating bank capital requirements.
  • Last week, RER and a coalition of leading business trade organizations encouraged prudential regulators to adopt requirements for large banks that support consumers, businesses, and the broader economy. (Roundtable Weekly, Dec. 5)

RER will continue to advocate policies that protect the safety and soundness of our financial system without harming credit flows and capital formation vital for CRE.   

Regulators Signal Capital Relief as House Hearing Sharpens Focus on Bank Requirements

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The House Financial Services Committee held an oversight hearing this week on prudential regulators, as federal agencies continue to reassess large bank capital standards. Ahead of the hearing, The Real Estate Roundtable (RER) and a coalition of business organizations urged regulators to modernize capital requirements to support lending, investment, and U.S. competitiveness.

House Financial Services Committee Hearing

  • Ahead of Tuesday’s hearing, Sen. Jerry Moran (R-KS) led a letter urging regulators to design the Basel III Endgame and GSIB Surcharge proposals to consider policies that would limit the adverse effects of disincentivizing banks from offering hedging products to industries sensitive to price volatility in commodity markets. (PoliticoPro, Dec. 2)
  • Federal Reserve Vice Chair for Supervision Michelle Bowman testified that regulators are not seeking to keep the “overall level of capital in the banking system the same,” leaving open the possibility that requirements may be reduced. (PoliticoPro, Dec. 2)
  • Trump-appointed regulators are negotiating a revised proposal to implement international Basel standards agreed to in 2017. The Biden-era draft would have significantly raised capital requirements and faced strong industry opposition. Earlier comments from Fed and FDIC officials suggested a “capital neutral” approach—but Bowman’s testimony indicated the final outcome could allow for lower aggregate requirements. (PoliticoPro, Dec. 2)
  • During the hearing, Rep. Andy Barr (R-KY) pressed regulators on whether they intend to issue a revised Basel III proposal that “predetermines a capital-neutral outcome even if some risks continue to be over-capitalized.” (PoliticoPro, Dec. 2)

Roundtable Advocacy

  • Ahead of the hearing, RER and a coalition of leading business trade organizations urged prudential regulators to examine and modernize large bank capital requirements so they continue supporting consumers, businesses, and the broader U.S. economy. (Letter, Dec. 2)
  • The coalition letter underscored the negative economic impacts of inappropriately calibrated capital rules, highlighted risks to American competitiveness, and commended ongoing agency efforts to improve the regulatory framework. (News Release, Dec. 2)

Enhanced Supplementary Leverage Ratio (eSLR)

  • The FDIC, OCC, and Federal Reserve signed off on the final version of a rule that reduces the size of the capital buffer large banks must maintain against total assets—recalibrating the enhanced supplementary leverage ratio to better reflect post-crisis market conditions. (Reuters, Nov. 25; PoliticoPro, Nov. 26)
  • The final rule, largely unchanged from the June proposal, adds a new cap on subsidiary-level capital buffers, a shift regulators say will modestly reduce aggregate requirements. (Roundtable Weekly, June 27)
  • The rule takes effect April 1, with banks permitted to adopt the looser standards starting Jan. 1. The FDIC also approved a proposed rule to lower leverage requirements for smaller banks.
  • In August, RER and Nareit provided comments to the FDIC, Treasury, and OCC supporting key elements of the proposed eSLR adjustments. (Letter, August, 15)
  • These changes add momentum to broader efforts to recalibrate bank capital rules ahead of the Basel III Endgame proposal expected in the coming months. (PoliticoPro, Nov. 26)

As regulators continue work on a revised Basel III Endgame proposal, RER will remain engaged to ensure capital reforms protect safety and soundness without constraining credit flows essential to commercial real estate, economic activity, and long-term investment.

NEWS: Business Trades Support Bank Capital Rule Reform to Boost Economic Growth

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(WASHINGTON, D.C.) — A coalition of leading business trade organizations urged prudential regulators to examine and modernize large bank capital requirements to ensure they support consumers, businesses, and the U.S. economy. The organizations, which represent a wide range of stakeholders, including small businesses, manufacturers, and farmers, highlighted the negative impact of inappropriately calibrated requirements on economic growth and American competitiveness, and applauded the ongoing efforts to improve the capital framework. 

A review of 13 economic studies found that increased capital requirements can cost the economy $100 billion to $150 billion per year and result in $2.3 trillion in lost economic productivity over 30 years.

“We greatly appreciate the work being undertaken by bank regulators to modernize capital rules to unleash economic growth and support various industries and sectors across the country. Specifically, common sense adjustments to Basel III Endgame, the GSIB Surcharge, stress testing, and leverage requirements will improve access to credit and reduce the costs of goods and services for American businesses and consumers, ensuring the U.S. economy can continue to thrive and grow,” the trade organizations said.

The statement for the record was signed by the Financial Services Forum, American Bankers Association, American Cotton Shippers Association, American Farm Bureau Federation, Bank Policy Institute, Business Roundtable, Commodity Markets Council, Consumer Bankers Association, Futures Industry Association, International Swaps and Derivatives Association, Mortgage Bankers Association, National Association of Manufacturers, National Association of REALTORS®, The Real Estate Roundtable, Securities Industry and Financial Markets Association, and U.S. Chamber of Commerce.

Read the full statement for the record here.