Global regulators target capital charges on "buy-to-let" mortgages

LONDON: Banks would have to set aside more capital to cover "buy-to-let" mortgages and place greater emphasis on a borrower's ability to repay a home loan under draft rules from global banking regulators on Thursday.

The Basel Committee of banking supervisors from the world's main financial centres published revised proposals for banks using the so-called standard approach, rather than in-house models, to determine how much capital they must set aside to cover the risk of a loan turning sour.

This so-called credit risk is the single biggest calculation made by banks as it covers between 60 and 90 percent of the risk-weighted assets on their books.

Thursday's second consultation on credit risk is aimed at simplifying Basel's suite of complex capital rules in order to iron out large differences in how much capital banks from different countries set aside to cover similar risks.

Basel unveiled key changes, such as introducing a clear delineation between types of home loans when it comes to capital charges.

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