Fed Vice-Chair of Supervision says US banks are to see new mortgage capital requirements in Basel plan

• Sees a path forward that incorporates both renewed bank participation in the mortgage market and a safe and sound banking system.
• Two regulatory proposals will soon be introduced that, among other broader changes to the regulatory capital framework, would increase bank incentives to engage in mortgage origination and servicing.
• Proposals would remove the requirement to deduct mortgage servicing assets from regulatory capital while maintaining the 250 percent risk weight assigned to these assets.
• The proposals would also consider increasing the risk sensitivity of capital requirements for mortgage loans on bank books.
• Strengthening bank participation in these activities does not threaten the safety and soundness of the banking system.

The Fed's Vice-Chair of Supervision has outlined new proposals aimed at modifying capital requirements for U.S. banks in relation to mortgage assets. By potentially removing certain deductions from regulatory capital and enhancing incentives for mortgage origination, these changes could lead to increased bank activity in the housing market without compromising system stability. This could have implications for risk perception around bank shares and broader financial stability perceptions in the sector.