Navigating the Future of Credit Risk: The Impact of HKMA's Enhanced CR-G-7
The HKMA's updated CR-G-7 isn't just a regulatory update; it's a signal of a shifting landscape for credit risk management in Hong Kong. This recalibration of collateral and guarantee requirements, effective April 2025, demands a proactive and strategic response from Authorised Institutions (AIs).
Beyond the immediate compliance deadline of April 2027, the enhanced CR-G-7 will fundamentally reshape how AIs approach:
Capital Efficiency: Expect heightened scrutiny on Risk Weighted Assets (RWA) utilisation and the inherent economic return on exposures subject to Credit Risk Mitigation (CRM). This necessitates a more sophisticated understanding of Loss Given Default (LGD), Loan-to-value (LTV) and their sensitivity to market changes.
CRM Management Framework: The update compels a holistic review of existing policies, procedures, systems, and controls on CRM. Boards and management teams must ensure robust oversight and clear delegation of responsibilities.
Data and Technology: Meeting the new requirements for data collection, MIS reporting, and governance oversight will require significant investment in technology and data management capabilities.
The AIs that proactively adapt to these changes will not only ensure compliance but also gain a competitive advantage through optimised capital allocation and enhanced risk management practices.
