New Basel Guidelines Categorize Bank Risk Exposures

The Basel Committee on Banking Supervision last Tuesday issued new “Guidelines on the prudential treatment of problem assets.” The guidelines, which Moodys says is “positive for banks,” seek to create uniformity across jurisdictions in how problem assets are treated, but there are notable exceptions to the regulations. The move came after a Basel committee voiced concern over bank risk controls.

New Basel definition covers defaults with the exception of derivatives

The new Basel definition of nonperforming exposures is designed to supplement not replace other regulatory definition of a bank’s “impaired” assets. The goal is to make the international comparison of nonperforming loan exposures and loss recognition uniform around the world.

The...