Hong Kong Regulations

BANKING (DISCLOSURE) RULES - SECT 79

Credit risk: disclosures on historical results

(1) An authorized institution shall—

   (a)  disclose the actual losses (including write-offs and specific
        provisions) for the annual reporting period for each IRB class or IRB
        subclass referred to in section 77(3); and

   (b)  in that disclosure—

        (i)    explain how the actual losses referred to in paragraph (a)
               differ from past actual losses in respect of the same such IRB
               class or IRB subclass; and

        (ii)   explain the factors which caused the losses referred to in
               paragraph (a).

(2) An authorized institution shall—

   (a)  subject to paragraph (b), disclose the estimates made against actual
        outcomes over a period sufficient to permit understanding of the
        reliability of the information provided by the institution pursuant to
        section 78 over the long run;

   (b)  without prejudice to the generality of paragraph (a)—

        (i)    subject to subparagraph (ii), disclose information on the
               estimates of losses against actual losses in each IRB class or
               IRB subclass referred to in section 77(3) over a long run to
               enable an assessment of the institution's performance of the
               internal rating processes for each such IRB class or IRB
               subclass;

        (ii)   where appropriate, disclose a breakdown of the information as
               disclosed pursuant to subparagraph (i) to provide an analysis
               of the PD and, if the institution uses the advanced IRB
               approach, the LGD and EAD outcomes against estimates provided
               in the disclosures it made pursuant to section 78; and

        (iii)  if there are material differences between the PD, LGD or EAD
               estimates given by the institution and the actual outcomes over
               the long  run, disclose— (A) a breakdown of the PD and, if
               the institution uses the advanced IRB approach, the LGD and EAD
               outcomes against estimates provided in the disclosures it made
               pursuant to section 78; and (B) an explanation of those
               differences.

(3) In this section—

"long run" (長遠期間) means a period of time sufficient to capture a
reasonable mix of high-default and low-default years of at least one economic
cycle.

"long run" (長遠期間)