Regulatory Alerts2025-07-21
Added · Updated
Supplementary Guidance on the Revised Credit Risk Framework Chapter IV IRB Approach
The Hong Kong Monetary Authority issues this guidance to clarify the application, adoption, and classification requirements for the Internal Ratings-Based approach under the revised Credit Risk Framework. It mandates that institutions justify any switch to less advanced approaches, submit detailed implementation plans, and adhere to strict rules regarding phased rollouts and exposure exemptions to prevent regulatory capital arbitrage. Furthermore, the document specifies precise thresholds and methodologies for classifying corporate, retail, and specialized lending exposures, while defining default criteria and transition rules for equity exposures effective from 2025.