The Basel Committee on Banking Supervision published the technical amendment Capital treatment of securitisations of non-performing loans.
The 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 the technical amendment are welcome until 23 August 2020. All comments may be published on the BIS website unless a respondent specifically requests confidential treatment.
Re-disseminated by The Asian Banker