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HKMA CA-G-4

HKMA CA-G-4: Validating Risk Rating Systems under the IRB Approach

CA-G-4 is a current module of the HKMA Supervisory Policy Manual for validating risk-rating systems under the internal-ratings-based approach. It applies to authorized institutions using or seeking approval to use IRB approaches for credit-risk capital. The module addresses governance, responsibilities, model design, data, discriminatory power, calibration, overrides, benchmarking, backtesting, stress testing, validation independence, documentation, and remediation. Broader enterprise risk governance sits in other HKMA modules, including IC-1.

Published: Last updated: Last reviewed by: Model Risk Directory editorial team
Quick answer

HKMA CA-G-4 sets validation expectations for internal-ratings-based credit-risk systems used by authorized institutions. The current 2025 version covers governance, data, model design, quantitative and qualitative validation, use tests, stress testing, overrides, validation frequency, independence, findings, and supervisory review. It is model-specific rather than an enterprise-wide MRM standard.

Jurisdiction
Hong Kong
MRM relevance
Model-specific prudential guidance
Effective date
18 July 2025
Issuing body
Hong Kong Monetary Authority
Official reference
brdr.hkma.gov.hk/eng/doc-ldg/spm/current/CA-G-4

What it covers

  • Active board and senior-management oversight of internal rating systems and estimates.
  • Independent validation with appropriate authority, competence, resources, and reporting.
  • Quantitative assessment of discriminatory power, calibration, stability, and data representativeness.
  • Qualitative review of design, documentation, data, controls, overrides, and use in decision-making.
  • Regular validation, issue tracking, remediation, and escalation of material weaknesses.
  • Evidence that internal ratings influence credit approval, monitoring, reporting, pricing, limits, and other uses.

Adoption status

HKMA issued version 3 on 18 July 2025, superseding the 2018 version. It is specific to IRB credit-risk rating systems and should not be generalized to every model at an institution. Teams should pair it with current Banking (Capital) Rules and relevant governance modules such as IC-1.

Reference only. This page explains what HKMA CA-G-4 covers; it is not a claim that Model Risk Directory or any listed vendor satisfies it. Verify alignment directly against the issuing body's own current text before relying on it.

Sources. source 1 · source 2 · source 3. Data as of 2026-07-29. See methodology.

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