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CREFC Policy Outlook: Capital and Liquidity Remain Key Focus in 2017 depending on the composition of a bank’s balance sheet at the time. It largely treats CRE and CMBS products similarly to other wholesale asset classes, but it is also redundant in many ways. Moreover, it is considered to be particularly onerous in its treatment of short-term/repo funding, which will further compromise CMBS market liquidity. In July, CREFC signed an industry letter along with The Clearing House and SIFMA, and also led a group effort with other CRE trade associations in the drafting of an industry-focused letter. The central issue in both letters that is of most importance to the CREFC community was the treatment of credit products, which we recommended be recalibrated. We have, and will continue to participate in conversations with the U.S. regulators and monitor European implementation, which appears to be tracking a more flexible set of standards. We will also begin to educate the new Congress and Administration regarding the harsh treatment of CMBS products under Basel III in comparison to both their performance during the crisis, and their performance relative to other asset classes that were treated less harshly under the new Basel rules. • HVCRE: The High Volatility Commercial Real Estate rule is the piece of Basel III that covers acquisition, development and construction (ADC) lending and has been in effect since January 2015. CREFC has formed a working group to address some of the many challenges of the HVCRE rule, which requires that 1.5 times the capital historically required be held against ADC loans. Other issues that CRE members have faced with the rule include several necessary clarifications of the definition of equity, conditions under which capital can be removed from a project, and also when a loan can be reclassified as a permanent facility. If you have any questions or want to get involved regarding the regulatory issues facing CRE finance, please contact Christina Zausner (czausner@crefc.org) or David McCarthy (dmccarthy@ crefc.org). For more information on the legislative agenda, please see Marty Schuh’s article in this edition. For a comprehensive reference regarding regulation affecting the CMBS sector, please see Patrick Sargent’s publications page to view “The Dawn of CMBS 4.0: Changes and Challenges in a New Regulatory Regime”, available at Alston.com/professionals/Patrick-sargent. 1 Chairman of the House Financial Services Committee, Jeb Hensarling (R-TX), introduced the CHOICE Act in May 2016, which included several provisions that would subject rulemaking procedures to certain standards (e.g., cost-benefit analyses), in addition to the Administrative Procedures Act, which provides little room for stakeholder engagement with the Agencies around the goals and design of new rules. 2 Chairman Martin Gruenberg of the FDIC announced that he intends to stay in office through his tenure in 2018. 3 As of this writing, Steve Mnuchin, the nominee for Secretary of the Treasury, has not yet shared his specific views on TBTF and/or breaking the banks up. He has said that the regulatory framework is too complex, specifically mentioning the Volcker rule, which is often cited as the modern version of Glass-Steagall. While Treasury itself wields no direct regulatory power over banks outside of money-laundering, the Secretary of the Treasury wields tremendous influence over the process as (a) chair of the Financial Stability Oversight Council and (b) as manager of the regulatory process when multiple regulators are involved, such as risk retention. 4 STS is a package of mitigations allowed under Basel III for securitizations that meet certain criteria that together favor large and granular securitization pools. The U.S. regulators rejected the idea, whereas the Europeans are adopting it. One area where there is divergence in treatment between the two regions due to the difference of opinion about the STS, is in the implementation of the Liquidity Coverage Ratio. The Europeans allowed for less stringent treatment of certain securitization asset classes than is the case in the U.S. CMBS, however, is excluded from benefits under the STS program in Europe and under the BCBS model, mostly because CRE and multifamily mortgages do not fully amortize. 5 The Basel IV package includes many measures that directly impact the CRE sector, including the risk-based capital treatment of stabilized loans (BCBS 347), ADC loans (BCBS 347), loans to financial institutions (BCBS 362), securitizations held in the trading book (e.g., Fundamental Review of the Trading Book, BCBS 352) and investment books (BCBS 303), and warehouse lines (BCBS 303). In addition, there are other features included in Basel IV that are expected to drive capital requirements higher broadly across business lines, such as changes to operational risk measurement (BCBS 355)and a new capital floors framework (BCBS 306). CRE Finance World Winter 2017 18
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Page 1: A publication of CRE Finance Counci
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Page 6 and 7: CRE Finance World CREFC Leadership
Page 8 and 9: to each of these new rules fit toge
Page 10 and 11: BANKER ROUNDTABLE MODERATORS Lisa P
Page 12 and 13: Banker Roundtable Andy Siwulec: Yes
Page 14 and 15: Banker Roundtable does PNC and Key
Page 16 and 17: Our Expectations for the Coming Con
Page 18 and 19: CREFC Policy Outlook: Capital and L
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Page 24 and 25: Challenges and Opportunities of Bre
Page 26 and 27: Post-Judgment Receiverships: A Cred
Page 28 and 29: New National Standard for Reporting
Page 30 and 31: Sharing the Experience — As Co-Wo
Page 32 and 33: Market Disruptors — Commercial Re
Page 34 and 35: Market Disruptors — Commercial Re
Page 36 and 37: Lurking Behind the CMBS Maturity Wa
Page 38 and 39: Lurking Behind the CMBS Maturity Wa
Page 40 and 41: Benchmarking CMBS Maturity Performa
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Page 44 and 45: The Las Vegas Metamorphosis — Fro
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Page 48 and 49: Blockchain: The Future of Real Esta
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Page 56: A LEADER IN COMMERCIAL REAL ESTATE

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