News

Banking Regulators Issue Long-Awaited Bank Capital Proposals

March 24, 2026 

On March 19, the banking regulators issued the long-awaited bank capital proposals, with comments due June 18, 2026. 

• CREFC and Mayer Brown will hold a webinar on Wednesday, March 25 at 3pm ET to cover the proposals’ key recommendations and our initial views on implications for CRE finance. Please click here to register.

The below two proposals were issued by all three agencies, the Federal Reserve Board, the Federal Deposit Insurance Corp (FDIC), and the Office of the Comptroller of the Currency (OCC):

• Proposed revisions to the risk-based capital framework applicable to the largest, most internationally active firms and to firms with significant trading activity (Basel III proposal)
  
• Proposed regulatory capital and standardized approach for risk-weighted assets (standardized approach proposal)

The G-SIB Surcharge proposal was issued by the Fed:

• Proposed risk-based capital surcharges for Global Systemically Important Bank holding companies (GSIB surcharge proposal)

The accompanying Board Memo states that the:

• Basel III proposal would revise the risk-based capital requirements that apply to the largest, most internationally active firms (Category I and II firms) and simplify the framework by subjecting firms to a single set of risk-based capital calculations;
• GSIB surcharge proposal would improve the measurement of systemic risk in the framework that determines the surcharge that applies to the largest and most complex banks; and
• Standardized approach proposal would revise the U.S. standardized approach, which applies to most banks, to better align capital requirements with the risk of traditional lending activities.

The regulators estimate the following capital impacts:

• Aggregate common equity Tier 1 capital requirements of Category I and II firms would decrease by 2.4% under the proposals (a 1.4% increase due to the Basel III proposal and a 3.8% decrease due to the GSIB surcharge proposal).
• The standardized approach proposal would decrease the aggregate common equity Tier 1 capital requirements of Category III and IV firms by 3.0% and of smaller banking organizations by 7.8%

Initial high-level takeaways for CRE:

• The standardized approach proposal recommends that risk weights for non-construction commercial real estate loans decrease from 100% to 95%. Table V.4: Impact on Risk-Weighted Assets on page 129-130 provides a summary of risk-weight impacts across assets.
  • Securitization risk-weights also would decline. Additionally, the proposal reduces the minimum risk weight for senior securitization positions from 20% in the current standardized approach to 15%.
  • The threshold-based deduction of mortgage servicing assets (MSAs) has been removed. All MSAs would receive a 250% risk weight under the proposal
• The Basel III proposal goes into significant detail on the treatment of CRE, including the definition of what constitutes regulatory commercial real estate exposures and accompanying risk-weights.
  • It allows for more granular capital treatment than the standardized approach.
    
  • Unfortunately, one of CREFC’s concerns related to the 2023 proposal reappears in this proposal: although common mezzanine/SPE financing structures are economically equivalent to first-lien lending, they continue to be penalized under a definition that requires a direct property security interest.

These proposals are the culmination of many years’ work to implement the 2017 international Basel agreement on bank capital requirements.

• In July 2023, the banking agencies jointly issued the notice of proposed rulemaking to implement the Basel III Endgame, which would have raised core equity Tier 1 capital for large and complex banks by 16%.
  • The banking industry fiercely opposed it, and it was never finalized.
  • The proposal also had negative implications for CRE finance, particularly given the onerous capital treatment of securitizations and warehouse lending. CREFC submitted a comment letter highlighting its concerns and led a joint letter from real estate industry groups.
• In September 2024, then Fed Vice Chair for Supervision Michael Barr announced a re-proposal attempt, but that effort stalled when President Trump took office and Barr stepped down.

What’s next: As noted above, CREFC and Mayer Brown, who is serving as drafting counsel on our comment letter, will hold a webinar on March 25 at 3pm ET.

Please contact Sairah Burki (sburki@crefc.org) with questions or if you want to join the CREFC Bank Capital Working Group.

Contact 

News Archive

News

Economy, the Fed, and Rates…

March 24, 2026

Economic Data & Labor Market

• Largest oil supply shock in a generation redefines the macro backdrop. The Strait of Hormuz—roughly a fifth of global oil and LNG—remains near a standstill entering the war’s fourth week. Brent closed at $112/bbl (+~50% since February 28); WTI at ~$98. Saudi officials project prices could exceed $180 if disruptions persist into late April.
• The labor market is signaling weak hiring, not mass layoffs. Initial jobless claims fell 8,000 to 205,000 (lowest since January); continuing claims edged up to 1.86 million. Payrolls averaged just +17,000/month in January–February, and February showed a net loss of 92,000 jobs. Firms are not aggressively firing, but hiring is not strong enough to absorb another shock cleanly.
• Housing is no longer getting help from declining mortgage costs. New-home sales plunged nearly 18% in January to a 587,000 annualized pace—the lowest since 2022 and below all Bloomberg survey estimates. Mortgage rates have jumped the most in nearly a year over the past two weeks as the war repriced the rate outlook.
• Fiscal support is running against the growth scare. Roughly $200b from lower taxes and refunds, plus a potential $200b Pentagon supplemental, are hitting an economy that already was slowing (Q4 GDP decelerated to 0.7% annualized; February payrolls contracted 92,000). Whether demand stays firm enough to prevent easing—or soft enough to require it—is the central tension for the Fed.

Federal Reserve Policy & the Warsh Transition

• Fed holds at 3.50–3.75%; Powell’s framework - tariffs first, oil second. One dissent (Miran, favoring a cut). Powell conditioned any future ease on seeing tariff-driven goods inflation pass through—before even addressing energy. Core PCE is running at an estimated 3.0%, and non-housing services inflation has been stuck at ~3.5% for a year. The updated SEP raised 2026 PCE to 2.7% (from 2.4%); the median still shows one cut.
• Rate-hike talk surfaced for first time this cycle. Powell said “several” participants discussed the possibility. Globally, Australia hiked outright; the BOE voted unanimously to hold and scrapped forward guidance that the next move was a cut; the ECB’s Nagel suggested a hike as soon as April. Central banks can look through a temporary shock only if underlying inflation is behaving—and it isn’t.
• The Warsh transition remains a live complication. Powell will serve as chair pro tempore if Warsh is unconfirmed by May, and has no intention of leaving the Board while the DOJ probe continues. Senator Tillis is blocking Warsh’s confirmation vote; U.S. Attorney Pirro is appealing a judge’s rejection of Fed subpoenas. Bessent called Powell’s decision to stay contrary to historical norms. Treasuries hit session lows, and stocks posted their worst Fed-day decline since 2024 after Powell’s remarks.

Treasury Yields & Bond Markets

• Three straight weeks of higher yields; short end doing most of the damage. The 2-year closed at 3.90% (+53 bps over three weeks, +18 bps this week)—highest since July 2025 and now above the Fed’s 3.75% upper target bound for the first time since the hiking cycle. The 10-year hit 4.38% (+44 bps/3 weeks), the highest since August. The 30-year reached 4.94% (+33 bps/3 weeks), just 15 bps from its 52-week high of 5.09%.
• Market pricing has flipped from cuts to potential hikes. Zero chance of a 2026 cut is now priced in, having started the war with two cuts priced in. Futures briefly showed ~50% odds of a 25 bp hike by October, before settling around 27% by close (CME). Next cut priced: July 2027.
• The market’s real fear is duration of the war, not the one-week spike. Critically, 5-year/5-year forward inflation expectations have not broken higher the way they did in 2022. The damage is concentrated in front-end policy expectations, not a broad long-end confidence shock—yet. If long rates follow short rates higher, the pain for risk assets gets materially worse.

Dollar, Commodities & Market Dynamics

• Dollar rallies on safe-haven flows, reversing months of weakness. Bloomberg Dollar Spot Index +0.5% Friday. Bloomberg Intelligence notes an unusual pattern: large-cap tech and consumer stocks are rising alongside the dollar rather than getting hurt by it. Normally, a stronger dollar pressures companies with big overseas revenues, but investors are treating U.S. multinationals as a relative safe haven because Europe and Asia face a worse energy hit.
• Gold suffers worst week in four decades; traditional havens are failing. Gold fell 3.2% Friday to ~$4,502/oz. Bonds are losing value amid inflation, gold is falling on dollar strength, and equities are down. Money market funds have become the safe haven of choice, suggesting a sidelining rather than a structural reallocation.
• The supply shock is broadening beyond crude. Iranian attacks damaged Qatar’s Ras Laffan LNG plant (the world’s largest), with officials estimating it will take years to repair. European TTF natural gas is up 141% YTD. Fertilizer, helium, and sulfur blockages threaten industries from chipmaking to agriculture. Brent +94% YTD; gas oil +126%.
• Credit is not yet broken, but it is tightening. HY bond funds saw $3.65 billion in outflows (week ended March 18)—the largest since Liberation Day. An early signal that higher oil and tighter financial conditions are beginning to matter outside headline commodity markets.
• S&P 500 posts fourth straight weekly loss; Nasdaq nears correction. S&P 500 fell 1.5% Friday, now nearly 7% below its all-time high. Nasdaq down 2%, approaching a 10% decline from its recent peak. KBW Bank Index −9% YTD as stagflation fears hammer financials.

CRE Finance Market Implications

• The brief rate-relief window has closed again. Three weeks ago, the 10-year sat at 3.94% and markets priced two Fed cuts. Today: the 10-year is at 4.38% (+44 bps) and zero cuts priced.
• Floating-rate borrowers lose the relief they were counting on. The next Fed cut is now priced for July 2027. Borrowers who underwrote bridge and construction loans to a declining-rate glide path face at least 15–16 more months at current SOFR levels—or more if the hike scenario materializes. Refi risk intensifies for 2026–2027 maturities.
• Funding channels matter more than spot property fundamentals right now. If private credit turbulence persists while banks remain cautious, transitional assets dependent on nonbank capital will likely feel it first. Bank-capital easing is a genuine medium-term positive for CRE lending capacity, but the 90-day comment period and current macro uncertainty delay any near-term benefit.
• AI-driven office demand is a real but narrow bright spot. Manhattan’s AI leasing surge is filling mid-market space and pushing rents in previously weak submarkets—a positive for top-tier urban office. But the demand is geographically and concentrated on a sector basis, and the broader backdrop argues for caution outside AI/tech-adjacent drivers.
• Energy-cost pass-through hits the property stack from both sides. Oil above $100 raises operating costs and construction inputs simultaneously. If Brent sustains above $110–$120, development budgets will face meaningful upward revisions—particularly for energy-intensive types such as data centers and cold storage. Higher construction costs plus higher financing costs compress new-development returns from both ends.

You can download CREFC's one-page MarketMetrics, which includes statistics covering the economy and the CRE debt capital markets, here.

Contact Raj Aidasani (raidasani@crefc.org) with any questions.

Contact 

News Archive

News

Senate Election Outlook Shake Up 

March 24, 2026

As the battle for the midterms kicks into high gear the political outlooks are changing for Senate Republicans. 

Why it matters: After the 2024 results, Democrats have had a tough 2026 senate map to contend with: 

• All but two of the 22 Republican seats up for election are in states that President Trump carried by at least 10% in 2024. 
• Democrats would have to flip four seats and hold seats in Georgia and Michigan, both of which Trump won in 2016 and 2024. 
• There are four seats that have been considered toss-ups since the beginning of the cycle, they are Maine, Michigan, North Carolina, and Georgia. 
• Recent political headwinds for the Republicans have led many to believe that Democrats have a chance to compete in four more states: Texas, Alaska, Ohio, and Iowa.

Texas

• In the Lone Star state, Democrats have dubbed the current situation a “perfect storm” for them to compete in the general election this fall. 
• State Senator James Talarico prevailed over Congresswoman Jasmine Crockett (D-TX-30). Talarico was viewed as the more moderate of the two and has made his faith a centerpiece of his campaign. 
• On the GOP side, there is a messy primary going on between Sen. John Cornyn (R-TX) and Texas Attorney General Ken Paxton. The success of Talarico and infighting on the GOP sides makes this the best opportunity Democrats have had to win a Senate seat in decades.

Alaska

• Former Congresswoman Mary Peltola (D-AK) entered the race in January and immediately made the race more competitive. Peltola represented Alaska in the House of Representatives from 2022-2025, the first Democrat to do so since 1972.
• In 2024, the state voted for Trump by a margin of 13 points, while Peltola only lost her 2024 election by two points, outrunning Harris by double digits. If there is even a hint of a blue wave this fall, Peltola has a shot at winning the state.

Ohio

• Ohio is becoming a true toss-up, even in a state Trump carried by 11 points in 2024. Democratic nominee and former Senator Sherrod Brown lost by only 4 points in 2024, significantly outrunning the top of the ticket. 
• In an election cycle that is looking promising for Democrats, Brown has a great shot to take back the seat.

Iowa 

• Iowa’s open-seat race is unexpectedly competitive after Sen. Joni Ernst (R-IA) announced her retirement.
• Despite Iowa’s GOP tilt, Democrats see an opening thanks to a competitive midterm environment. Ernst won her last election by six points and President Trump won the state by 13 points.
• Democrats are deciding between Josh Turek, a two-time Paralympic gold medalist who represents the reddest state house seat held by a Democrat. The other option is progressive candidate Zach Wahls, a state Senator who is a sixth-generation Iowan who is currently serving in the state's Senate. 
• On the GOP side, Congresswoman Ashley Hinson (R-IA) is the likely nominee with a host of endorsement, including President Trump.

The bottom line: Strong candidate recruitment and macro political environment dynamics may put enough seats in play to make Democratic control of the upper chamber a possibility.

Contact James Montfort (jmontfort@crefc.org) with any questions.

Contact  

News Archive