FDIC Proposes to Align Real Estate Lending Standards with CBLR

The FDIC today proposed changes to its guidelines for real estate lending policies in order to align standards with the community bank leverage ratio, which does not require electing institutions to calculate tier 2 capital or total capital.

According to the FDIC, the proposed rule would allow “a consistent approach for calculating the ratio of loans in excess of the supervisory loan-to-value limits at all FDIC-supervised institutions, using a methodology that approximates the historical methodology the FDIC has followed for calculating this measurement without requiring institutions to calculate tier 2 capital.” The agency said the new rule also would avoid any regulatory burden that could arise if an FDIC-supervised bank decides to switch between different capital frameworks.

In addition, the proposal would ensure that the FDIC’s regulation regarding supervisory LTV limits is consistent with how examiners calculate credit concentrations, as directed by a statement issued last year that examiners will use tier 1 capital plus the appropriate allowance for credit losses as the denominator when calculating credit concentrations. Comments are due 30 days after the comment is published in the Federal Register.