The FDIC today issued a final rule making 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. The final rule was unchanged from a proposal issued in June.
The final rule will 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 new rule will also avoid any regulatory burden that could arise if an FDIC-supervised bank decides to switch between different capital frameworks.
In addition, the rule will 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.