HKMA revised the guidelines on credit risk management for personal lending business of authorized institution. The revisions are aimed to provide greater flexibility to authorized institutions in the use of new credit risk management tools powered by financial technology. The guidelines allow authorized institutions to carve out a small portion of their personal lending portfolio as New Personal-Lending Portfolio (NPP) and apply innovative credit analytic tools built on financial technology to assess and approve credit applications.
As part of the Banking Made Easy initiative, HKMA had issued the guidelines in May 2018. Several authorized institutions have since rolled out new retail credit products following the guidelines and the business has been operating smoothly. In view of this latest development, HKMA considers that it is no longer necessary to set an across-the-board limit applicable to all authorized institutions on such lending (that is, 10% of the capital base of an authorized institution). Instead, HKMA expects authorized institutions intending to develop this business to set a limit of their own, which should be commensurate with their risk appetite and risk management capability. The guidelines have, therefore, been updated and are available in the Annex to the circular.
Keywords: Asia Pacific, Hong Kong, Banking, Credit Risk, Personal Lending Portfolio, Fintech, Risk Appetite, HKMA
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