Regulatory Alerts2025-07-18
Added · Updated
Validating Risk Rating Systems under the IRB Approach
The Hong Kong Monetary Authority issues this statutory guideline to establish supervisory expectations for authorized institutions validating risk rating systems under the Internal Ratings-Based approach. The document mandates that institutions maintain robust qualitative controls and quantitative validation techniques to ensure the accuracy of probability of default, loss given default, and exposure at default estimates. Compliance with these requirements is essential for obtaining and retaining regulatory approval to calculate capital adequacy for non-securitization credit risk exposures.