The Financial Services Authority has moved from a June deadline to a “glide path” implementation of its controversial new slotting regime.
The regulatory body is working with UK banks on a case-by-case basis to bring in the change, which will result in lenders reclassifying the riskiness of their commercial real estate loans.
A phased implementation of new risk-weighted modelling will still force banks to raise additional capital to cover their newly categorised loan books, but will avoid a “big bang” introduction this month.
An FSA spokesman said: “We are working with individual banks to bring the regime into place over the next few months.”
He added that the rules could be implemented on a staggered basis for the relevant firms.
Speaking at Savills’ annual financing property presentation this week, the agent’s UK head of valuation, William Newsom, said that although slotting is “seriously onerous on the UK banks, we see it as good for the property industry”.
He said: “It will accelerate the sale of loan books and other workout scenarios, which will accelerate the resolution of legacy issues, which will in turn accelerate sales and/or active management of individual properties.”
A blanket risk-weighting model was first mooted by the FSA in 2007 under the Basel II banking regime, which would have required all banks to replace their internal risk models with the FSA’s more prescriptive version.
This model of classifying loans from “strong” through to “default” with different risk weightings could have forced banks to raise between £20bn and £40bn to bolster capital ratios.
The FSA has since dropped its guidelines and is in negotiations with relevant UK lenders including Royal Bank of Scotland and Lloyds Banking Group, The new regime will apply to both existing loans and new lending.
