Quote Originally Posted by Snoopy View Post
Thanks for the above reference



Pages 3 and 4 look like an index. The tables on 'Overview of revised standardised approach to credit risk' seem to be on pages 7 and 8.

It is interesting that you mentioned 'real estate', because that was a sector that was in the forefront of my mind.

I am not so sure you are right about real estate being treated for conservatively. The old Basel 2 standard had residential real estate given a blanket RMA factor of 50%. This means that a bank was allowed to loan $2 for a real estate loan, and they would have been regarded as having the same adjusted leverage as if they had lent just $1 on a standard loan. This was a serious incentive to lend against residential real estate.

Now if we look at residential real estate, page 8 of your reference, then under Basel 3 the RMA factor changes according to the equity you hold in your house.
The $2 leverage into real-estate makes sense. Lend to real-estate at any opportunity. Apparently over the last few years in Ausi banks have also encouraged interest only mortgages.