Hong Kong Regulations

BANKING (DISCLOSURE) RULES - SECT 78

Credit risk: disclosures on risk assessment

(1) An authorized institution shall, for each IRB class or IRB subclass
referred to in section 77(3), disclose the amount of exposures

(including the EAD of on-balance sheet exposures and off-balance sheet
exposures) separately for each IRB calculation approach used by the
institution to which the exposures concerned are subject.

(2) Subject to subsection (3), an authorized institution shall disclose—

   (a)  for the IRB classes referred to in section 77(3)(a), the EAD of
        on-balance sheet exposures and off-balance sheet exposures, on a
        stand-alone or combined basis, in respect of the counterparties to the
        exposures;

   (b)  for the IRB class referred to in section 77(3)(b), the EAD of its
        equity exposures; and

   (c)  for each IRB class referred to in section 77(3)(a) and (b)—

        (i)    if the institution uses the advanced IRB approach, the
               exposure-weighted average LGD expressed as a percentage; and

        (ii)   the exposure-weighted average risk-weight.

(3) For the purposes of complying with subsection (2), an authorized
institution shall ensure that—

   (a)  the disclosure required by that subsection is across a number of
        obligor grades (including defaulted obligor grades) which is
        sufficient for a consistent, logical and cogent differentiation of the
        credit risk inherent in the exposures to which the information
        required to be disclosed under subsection (2)(a), (b) or (c) relates;

   (b)  the disclosures of the PD, LGD and EAD take into account the effect of
        recognized collateral, recognized netting, recognized guarantees and
        recognized credit derivative contracts;

   (c)  the disclosure of an obligor grade includes the exposure-weighted
        average PD for each grade; and

   (d)  it does not aggregate obligor grades for the purposes of disclosure
        except in a manner which represents a breakdown of obligor grades,
        used in the IRB approach used by the institution, which provides for a
        consistent, logical and cogent differentiation of the credit risk
        inherent in the exposures.

(4) An authorized institution which uses the advanced IRB approach—

   (a)  shall disclose the amount of undrawn commitments and exposure-weighted
        average EAD of each IRB class referred to in section  77 (3)(a) and
        (b); and

   (b)  only needs to disclose one estimate of the EAD of each such IRB class.

(5) An authorized institution shall, in respect of an IRB subclass referred to
in section 77(3)(c), (d) or (e), disclose—

   (a)  on a pool basis the information required by subsections (2) and

(3); or

   (b)  a breakdown of exposures (the EAD of on-balance sheet exposures and
        off-balance sheet exposures) on a pool basis into a number of EL
        grades which is sufficient to provide for a consistent, logical and
        cogent differentiation of the credit risk inherent in the exposures.