Regulator council backs stricter GSE capital standards

The Financial Stability Oversight Council largely endorsed the Federal Housing Finance Agency's proposal to raise capital requirements on Fannie Mae and Freddie Mac.

Following a review of the secondary mortgage market, the council of federal regulators said the government-sponsored enterprises could pose a risk to financial stability if not properly mitigated. It encouraged the FHFA to incorporate regulatory capital definitions like those that apply to U.S. banks.

The FHFA in May reissued a proposed rule to require the GSEs to hold a combined $240 billion in capital after they are released from conservatorship. The agency suspended regulatory capital requirements on Fannie and Freddie after placing them into conservatorships in September 2008.

In a comment letter last month, ICBA said it generally supports the FHFA's efforts to recapitalize the GSEs. It encouraged the agency to quickly finalize the proposal and position the GSEs to emerge from the 12-year conservatorship.