Bank Capital Proposals Unveiled
March 19, 2026
Today, the banking regulators issued the long-awaited bank capital proposals, with comments due 90 days after publication in the Federal Register.
CREFC and Mayer Brown will hold a webinar on 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):
The G-SIB Surcharge proposal was issued by the Fed:
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 which 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 get 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.