The regulators, which include the Federal Reserve, the Treasury’s Office of the Comptroller of the Currency, and the FDIC, said Basel III sets the stage for key regulatory changes to strengthen the capital and liquidity of internationally active banking organizations in the United States and around the world. Basel III will require banks to hold top-quality capital totaling 7% of their risk-bearing assets, up from just 2% under current rules. The rules may require banks to raise hundreds of billions of dollars of fresh capital over the next decade.
The regulators said the transition period, which phases in the new requirements through Jan. 1, 2019, gives institutions the opportunity to implement the standards gradually, thus alleviating the potential for short-term pressures on the cost and availability of credit to households and businesses.
The credit quality of first-lien residential mortgages held steady in the second quarter of 2010, holding onto some of the slight improvements seen in the first quarter, according to the OCC and OTS Mortgage Metrics Report—Second Quarter 2010. Current and performing mortgages held firm at 87.3%, the same rate as the previous quarter—an improvement from the recent low of 86.4% in the fourth quarter of 2009, though down from 88.6% in the year-ago period.
The report, issued jointly by the Office of the Comptroller of the Currency and the Office of Thrift Supervision, both agencies of the Treasury Department, covers 34 million mortgages, representing 65% of all first-lien mortgages in the country, worth nearly $6 trillion in outstanding balances. The full report is available at tinyurl.com/27wxy4b.
The report said the rate of serious delinquencies fell to 6.2%, down from 6.5% in the first quarter of 2010 and 7.1% in the fourth quarter of 2009. At the end of the second quarter of 2009, 5.3% of all loans were seriously delinquent. Loans are seriously delinquent if they are more than 60 days past due or, in the case of borrowers in bankruptcy, 30 or more days past due.
Of loans modified in the fourth quarter of 2009, 20.6% were 60 or more days delinquent six months after modification compared with 42.7% of loans modified in the first quarter of 2009. The re-default rate for modifications that reduced borrowers’ monthly payments by 20% or more was 11.6% for modifications made in the fourth quarter of 2009 compared with 27.7% in the first quarter of 2009.
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