Capital treatment of securitisations of non-performing loans

The Committee is publishing this technical amendment to address a gap in the regulatory framework and set out a prudent treatment for securitisations of non-performing loans. The proposal was being developed by the Committee before the onset of the Covid-19 pandemic.

The technical amendment establishes a 100% risk weight for certain senior tranches of non-performing loan securitisations. The risk weight applicable to the other positions are determined by the existing hierarchy of approaches, in conjunction with a 100% risk weight floor and a ban on the use of certain inputs for capital requirements. The present amendment does not change the applicable capital requirements to securitisations of performing assets.

Comments on any element of this paper should be submitted here by 23 August 2020. All comments may be published on the BIS website unless a respondent specifically requests confidential treatment.