The Basel Committee is consulting on changes to the capital rules to provide a prudent treatment in respect of securitisations of non-performing loans. It had started to develop these plans before Covid-19 and has now published it. The proposal for a technical amendment would create a standardised definition of NPL securitisations (and the changes would apply only in relation to these – but national regulators could set stricter criteria) and would establish a risk weight floor of 100% for all NPL securitisation exposures and a fixed 100% risk weight for certain senior tranches of these securitisations. The changes, if approved, would come into effect no later than 1 January 2023.
Consultation closes on 23 August.