Basel Committee proposes amendment to capital rules for non-performing loan securitisations

• Proposal sets out a prudent treatment for securitisations of non-performing loans with a risk weight floor of 100% for these exposures
• Proposal addresses a gap in the regulatory framework and was being developed before Covid-19
• Comments on this technical amendment welcome until 23 August

The Basel Committee on Banking Supervision published today the technical amendment Capital treatment of securitisations of non-performing loans. This proposal, which the Committee started developing before the onset of the Covid-19 pandemic, addresses a gap in the regulatory framework and sets out a prudent treatment for securitisations of non-performing loans.

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.