Bill includes sensible reforms for the nation’s banking system, including HVCRE rules
Thomas Bisacquino, NAIOP President and CEO
NAIOP, the Commercial Real Estate Development Association, commends the U.S. Senate on its bipartisan passage of S. 2155, a bill that includes sensible reforms for the nation’s banking system, and which would reform the High Volatility Commercial Real Estate (HVCRE) rules created by Basel III.
The HVCRE rule requires banks to hold back more capital in reserve for many acquisition, development and construction (ADC) loans that are important to commercial real estate development. ADC loans from commercial banks provide the largest source of the nation’s $3.9 trillion in commercial real estate debt outstanding, and are a crucial source of continued financing to the commercial real estate industry.
“The current HVCRE rule is overly broad and forces banks to hold unreasonably high capital levels before they may make certain loans,” explained Thomas Bisacquino, NAIOP president and CEO. “Many stable loans are being brought under the HVCRE designation, making it more expensive for banks to provide the financing for worthy real estate projects that are critical to continued economic growth. We commend the Senate for passing a measure addressing the problem by providing greater clarity on the HVCRE issue.”
The HVCRE rule’s implementation has been unclear in the three years it has been in effect, with regulators failing to address concerns raised by the lending and borrowing community with the rule. A bipartisan amendment co-sponsored by Senators Tom Cotton (R-AR) and Doug Jones (D-AL) adopted to S. 2155 clarifies the Basel III HVCRE rule, ensuring that smaller banks can continue to lend safely to commercial real estate borrowers.
The Senate bill is a much-needed updating of the Dodd-Frank law of 2010 and its regulatory aftermath, providing a sensible financial regulatory framework that permits stable capital formation and balanced and disciplined lending. NAIOP believes that, now that the Senate has passed the bill by a 67-31 vote, the House and Senate should act quickly to reconcile their versions of reform legislation and get a bill to President Donald Trump’s desk.