May 17, 2018

HKMA issued, as a technical note, the revised version of the Supervisory Policy Manual (SPM) module CA-G-4 on validating risk rating systems under the internal ratings-based (IRB) approach for authorized institutions. The module sets out the HKMA approach to the validation of authorized institutions' internal rating systems and the requirements that HKMA expects authorized institutions to follow, to qualify for using the IRB approach to measure credit risk for capital adequacy purposes. The revision was intended mainly to update the module with the prevailing regulatory requirements applicable to the use of the IRB approach under the Banking (Capital) Rules. The module is applicable to all locally incorporated authorized institutions that use, or intend to use, the IRB approach to measure credit risk for capital adequacy purposes.

Keywords: Asia Pacific, Hong Kong, Banking, IRB Approach, Credit Risk, Capital Adequacy Module, CA-G-4, HKMA

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