Basel IV Update: SA and IRB

Basel IV, the final stages of the Basel III reform package, is likely to come into effect in Hong Kong on 1 January 2025. The reforms include changes to the standardised approach (SA) and internal ratings-based (IRB) approach of the credit risk framework, aiming to reduce the variability of risk-weighted assets.

Banks and other institutions in Hong Kong should be assessing their readiness for the impact of the upcoming reforms. This flyer summarises the key updates and changes, and shares guidance on areas including new parameters for SA and IRB, illustrative impacts on SA risk-weighted asset density, and new treatments for IRB exposures.