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.

Effectiveness

Comments to be received by August 23, 2020.

Client Impact:

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

For more information, visit www.bis.org



We use cookies in order to give you the best possible experience on our website. By continuing to use this site, you agree to our use of cookies.
Accept