BCBS updates standards on NPL securitisations

2020/11/26

The Basel Committee on Banking Supervision (BCBS) published a technical amendment on the capital treatment of securitisations of non-performing loans (NPLs). The rule closes a gap in the Basel framework by setting out prudent and risk-sensitive capital requirements for NPL securitisations. In contrast to the consultative proposal from June 2020, the final rule permits banks to apply the external ratings-based approach to NPL securitisation exposures, without the 100% risk-weight floor. In addition, the final rule includes discounts on tranche sales in the definition of discount incurred by the originating bank that factors in the capital requirements. The technical amendment should be implemented no later than January 2023.