The Basel Committee on Banking Supervision amended its capital requirements for non-performing loan securtisations throuh a WOCCU advocated technical amendment Capital treatment of securitisations of non-performing loans. The rule closes a gap in the Basel framework by setting out prudent and risk sensitive capital requirements for non-performing loan securitisations.
The final rule permits banks to apply the external ratings-based approach to non-performing loans securitisation exposures, without the 100% risk weight floor. In addition, the rule refines the definition of discount incurred by the originating bank that factors in the capital requirements.
WOCCU commented on this proposal in June advocating for relief in connection with the securitisations of non-performing loans. The rule should make it easier and cheaper for banks and credit unions to securtise non-performing loans which will be important as institutional stress increases as a result of COVID-19.
A copy of the amendment can be viewed here.