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New Framework Puts CMBS Trading Under Pressure


The Basel Committee—made up of members like the Fed and People’s Bank of China—is calling for a 40% increase in the amount of capital required for CMBS trading.

The change isn’t as drastic as it could be—some expected an increase of over 400%—but, Christina Zausner, VP of Policy and Industry Analysis at the CRE Finance Council, says the increase will force banks to hold more capital against a business that is becoming less profitable.

The higher requirements could create a downward spiral by causing lower CMBS issuances, leading investors to take money out of the mortgage-backed securities. Those sell-offs in turn could mean a drop in value for CMBS shares. [GS]

Related Topics: CMBS, Basel III