Risk Weighting Change Could Curb MBS Appetite

The Basel Committee on Banking Supervision, under the auspices of the Bank for International Settlements (BIS), offered proposals last week to revamp current international bank capital requirements, including a significant reduction in the risk weighting for high-quality corporate paper.

The BIS's 62-page report seemed to offer both good and bad news for the mortgage market. The good news was, contrary to market-wide rumors early last week, the BIS did not recommend that current 0% risk weightings for Ginnie Mae bonds be increased to become more like those for Fannie Mae and Freddie Mac bonds, which currently have a risk weighting of 20%.