Regulatory Alerts1999-11-08
Added · Updated
Loan Classification and Provisioning
The HKMA provides guidance requiring institutions to align loan classification definitions with its system and apply specific overdue period thresholds, classifying unsecured or partially-secured loans as at least substandard after three months and doubtful after six months. Institutions must determine provisions on a loan-by-loan basis for likely losses, using benchmark levels of 20% for substandard and 50% for doubtful loans only when reliable loss estimation is not possible. The guidance also mandates careful review of rescheduled loans to prevent evergreening and requires adequate provisioning for investment debt securities.
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