Bank Capital Requirements: Banking Agencies Finalize Rule Revising the Regulatory Capital Definition of High Volatility Commercial Real Estate Exposure

Sullivan & Cromwell LLP - December 12, 2019
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On November 19, the Federal Reserve, the OCC, and the FDIC finalized a rule revising the definition of High Volatility Commercial Real Estate (“HVCRE”) exposure under the capital rules of each agency to conform to the statutory definition in Section 214 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) enacted in May 2018.  Specifically, the final rule will conform the agencies’ “HVCRE exposure” definitions to EGRRCPA’s definition of “high volatility commercial real estate acquisition, development or construction (“HVCRE ADC”) loans” and maintain a risk weight of 150 percent for HVCRE exposures.  The final rule becomes effective on April 1, 2020.