Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 57

Public sector entity exposures

(1) Where a public sector entity exposure of an authorized institution
consists of an exposure to a domestic public sector entity, the institution
shall allocate a risk-weight to the exposure which is—

   (a)  the next higher risk-weight than the risk-weight attributable to the
        credit quality grade applicable to the Government in accordance with
        section 55 on the basis of an ECAI issuer rating assigned to the
        Government or, if there is no such higher risk-weight, the risk-weight
        so attributed to the credit quality grade applicable to the
        Government;

   (b)  if a credit quality grade of 4 or 5 has been allocated to the
        Government on the basis of an ECAI issuer rating assigned to the
        Government, a risk-weight of 100%; or

   (c)  if the Government does not have an ECAI issuer rating, a risk-weight
        of 100%.

(2) Where a public sector entity exposure of an authorized institution
consists of an exposure to a foreign public sector entity—

   (a)  subject to paragraphs (b), (c) and (d), the institution shall allocate
        a risk-weight to the exposure which is the next higher risk-weight
        than the risk-weight attributable to the credit quality grade
        applicable to the sovereign of the jurisdiction in which that entity
        is incorporated in accordance with section 55 on the basis of an
        ECAI issuer  rating assigned to the sovereign or, if there is no such
        higher risk-weight, the risk-weight so attributed to the
        credit quality grade applicable to the sovereign;

   (b)  if the entity is a sovereign foreign public sector entity, section 55,
        with all necessary modifications, applies to the exposure as if the
        entity were a sovereign, using the ECAI issuer rating of the sovereign
        of the jurisdiction in which that entity is incorporated;

   (c)  if a credit quality grade of 4 or 5 has been allocated to the
        sovereign referred to in paragraph (a) on the basis of an ECAI issuer 
        rating assigned to the sovereign, the institution shall allocate a
        risk-weight of 100% to the exposure;

   (d)  if the sovereign referred to in paragraph (a) does not have an
        ECAI issuer rating, the institution shall allocate a risk-weight of
        100% to the exposure.