Basel Committee proposes amendment to capital rules for non-performing loan (NPL) securitizations

June 23, 2020

100% Risk Weight

Technical amendment on capital treatment of securitizations of non-performing loans, which pre-dates the pandemic, addresses a gap in the regulatory framework and sets out a prudent treatment for securitizations of non-performing loans. Establishes a 100% risk weight for certain senior tranches of NPL securitizations. Risk weight for other positions determined by the existing hierarchy of approaches. Along with a 100% risk weight floor and a ban on the use of certain inputs for capital. It does not change applicable requirements to securitizations of performing assets. The committee is of the view that securitizations of non-performing loans are subject to different risk drivers compared to securitizations of performing assets. Points to a need for a specific treatment to reflect differences in a risk-sensitive way.


Comments to be received by August 23, 2020.

Client Impact:

Basel ruling will likely affect U.S. Regulatory Reporting RWA treatment going forward

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