Regulatory Alerts2026-08-20
Added
Implementation guidance on Banking (Capital) Rules Annex 2: Chapter IV - IRB approach
This document provides implementation guidance for Authorized Institutions (AIs) on Chapter IV of the Banking (Capital) Rules regarding the Internal Ratings Based (IRB) approach. It clarifies that AIs must obtain prior consent from the Monetary Authority (MA) to switch between IRB calculation approaches or to less advanced methods, requiring justification and prohibiting regulatory capital arbitrage. The guidance details requirements for IRB implementation plans, conditions for phased rollouts, and factors the MA considers for exemptions from the IRB approach, noting that exemptions are generally for immaterial exposures not exceeding 10% of an institution’s risk-weighted amount for credit risk and are not permanent. Additionally, it specifies classification rules for corporate and retail exposures, including the use of audited financial statements for certain classifications and the adoption of the STC approach for equity exposures after January 1, 2025.