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

LONDON, Dec 10 (Reuters) - 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.

It proposes categorising all exposures to real estate, including specialised lending exposures, under the same asset class.

Exposures to so-called buy-to-let mortgages, which are taken out by landlords to buy property to rent out, would have a higher risk weighting, meaning more capital would be needed to cover them, Basel said. (Reporting by Huw Jones; editing by Carolyn Cohn)