KBRA Releases Research – U.S. Bank Regulatory Proposed Changes to the Residential Loan Risk-Weight Scheme: Measuring the Impact on Capital

KBRA releases research that reviews the impact on capital stemming from the Basel III Endgame Proposal to modernize the regulatory capital framework of the banking system. The report focuses on the proposal related to the risk weighting of residential mortgage loans, highlighting the proposed changes and their likely subsequent effect on banks' risk weighted assets. In doing so, the report illuminates the amount of potential capital "freed up" by the proposal, which we expect to be meaningful, though not transformational. We further examine recent trends in regulatory capital ratios, summarizing the various market factors since the global financial crisis and their impact on bank capital management. Finally, we conclude with commentary on our ongoing dialogue with bank management teams and the likely effect on near-term capital management.

Click here to view the report.