How Basel III Might Blow Up CMBS

WASHINGTON, DC—A client note from JP Morgan Chase says the rule could require secondary market-maker banks to hold between 30% to 274% in capital against the market value of the CMBS issues.

By Erika Morphy | Updated on November 08, 2015

WASHINGTON, DC—The Basel Committee on Banking Supervision is expected to publish a rule change for banks’ fixed income trading books (FRTB) that could hurt — quite significantly in the worse case scenario — the CMBS market, according to a client note published by JP Morgan Chase.

This rule has been under consideration for a number of years in the Basel III deliberations and the industry had been expecting an increase in capital. A year ago, for example, word on the street was that when it is all said and done, Basel III’s capital retention for commercial real estate loans will be as much as 25%.

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