Aligning real estate lending standards with the new community bank leverage ratio (CBLR) rule is the aim of a proposal issued Tuesday by the board of the federal deposit insurance agency.
The proposal by the Federal Deposit Insurance Corp. (FDIC), which would amend interagency guidelines for real estate lending policies, was issued with a 30-day comment period.
According to the agency, the proposal would allow a consistent approach for calculating the ratio of loans that exceed the supervisory loan-to-value limits (LTV Limits) at all FDIC-supervised institutions. It would use a methodology that approximates the historical methodology the FDIC has followed for calculating this measurement without requiring institutions to calculate tier 2 capital, according to the agency.
The CBLR rule does not require banks that elect to use it to calculate tier 2 capital or total capital, the FDIC pointed out.
“The proposal would also avoid any regulatory burden that could arise if an FDIC-supervised institution subsequently decides to switch between different capital frameworks,” the FDIC asserted.