Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 55

Sovereign exposures

Division 3—Determination of risk-weights applicable to on-balance sheet
exposures

(1) Where a sovereign has an ECAI issuer rating, or an ECAI issue 
specific rating assigned to a debt obligation issued or undertaken by the
sovereign, an authorized institution shall map the ECAI issuer rating or
ECAI issue specific rating, as the case may be, to a scale of credit 
quality grades represented by the numerals 1, 2, 3, 4, 5 and 6 in accordance
with Table A in Schedule 6.

(2) Subject to sections 56 and 69, an authorized institution shall allocate a
risk-weight to a sovereign exposure which falls within subsection (1) in
accordance with Table 2.

TABLE 2

RISK-WEIGHTS FOR SOVEREIGN EXPOSURES

Credit quality grade

   (sovereigns)
Risk-weight 1 0% 2 20% 3 50% 4 100% 5 100% 6 150%

(3) Subject to section 56, where a sovereign has neither an ECAI issuer 
rating, nor an ECAI issue specific rating assigned to a debt obligation issued
or undertaken by the sovereign, an authorized institution shall allocate a
risk-weight of 100% to an exposure of the institution to the sovereign.