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The report states that the Danish Financial Supervisory Authority has recorded that some companies apply a risk weight of 100% for default portfolios.
The regulation on capital requirements stipulates that a weighting of 150% should be used.
This nuance determines how much dollars the collection company must have behind every loan it buys.
This risk weighting should be retained until the company itself has recorded a write – down of at least 20%.
This means that a debt collection company that buys a portfolio of unproductive loans of $ 1 billion must risk that debt at $ 1.5 billion, until it has reduced the debt. cost price of at least 20%.
This means in practice that debt purchasers need a greater equity reserve than if they only used a risk weight of 100%.
Finanstilsynet says they will now follow Norwegian financial companies to make sure they comply with the rules.
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