via e-mail
Office of the Comptroller of the Currency
250 E Street, SW
Public Information Room
Mailstop 1-5
Washington, DC 20219
Attention: Docket No. 03-14
Ms. Jennifer J. Johnson, Secretary
Board of Governors, Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
Re: Docket No. R-1154
Robert E. Feldman
Executive Secretary,
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attention: Comments
Regulation Comments
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
Attention: No. 2003-27
Dear ladies and gentlemen:
The National Housing Conference (NHC) wishes to
submit these comments on the proposed regulations implementing the New
Basel Capital Accord, which include the public welfare investments made
by banks in compliance with the Community Reinvestment Act (CRA) in the
broader risk test for determining capital charges for higher risk, non-CRA
investments.
NHC feels that treating CRA investments as
high-risk, and lumping them in more liquid, volatile, and higher
yielding holdings, is inappropriate on both technical and policy
grounds:
·
The Basel II equity definition seeks to capture investment
with volatile returns and significant downside. In fact, CRA equity
investments (such as LIHTC's) are usually long term, low risk
investments, with default/ foreclosure/ failure rates many times lower
than other types. (LIHTC equity, for instance, has a historical
foreclosure rate of under 0.15% – that is, fewer than 1½ in 1,000
properties.)
·
CRA and affordable housing investments are
government-enabled, government-encouraged, and government-subsidized,
with a combination of mandatory performance evaluations and favorable
tax/ reporting treatments (such as those you have recognized in Part 24
Legislated Program Equity Investments). Including these low-risk
investments in the category subject to the broader risk test for
determining capital charges will simply motivate financial institutions
to cease investing, undermining a critical element in our nation's
delivery system of multifamily affordable housing.
NHC therefore urges that changes be made to the
proposed rule to exempt CRA investments from the test for determining
capital requirements for other bank equity holdings.
Sincerely
Conrad Egan
National Housing Conference
Washington, DC
