HKMA Ups the Competency Bar for Credit Risk Management

The HKMA – in collaboration with the HKIB and banking sector – has published a new framework aimed at enhancing professional competencies in the credit risk management function.

The HKMA (Hong Kong Monetary Authority) has issued a circular announcing the launch of a new Enhanced Competency Framework on Credit Risk Management.

“Credit is one of the core business functions of most authorised institutions and credit risk can arise throughout various dealings or lending activities with other counterparties,” the HKMA says. “Therefore, an effective and comprehensive credit risk management system is important to [their] safety and soundness.”

A collaborative effort of the HKMA, the HKIB (Hong Kong Institute of Bankers) and the banking sector, the new Framework establishes a set of common and transparent professional competency standards for practitioners in the credit risk management function at authorised institutions.

It aims to facilitate the development of job skills and professional competencies and capabilities of credit risk management practitioners – in both the front office and middle office – engaged in commercial credit business functions for large, medium and small corporations.

The Framework covers competencies in credit initiation and appraisal, credit evaluation, approval and review, credit risk management and control, and ethical conduct – as the HKMA seeks to promote a more effective credit risk management workforce in Hong Kong.

Consumer lending and some specialised functions, such as credit risk modelling, are not included in the framework.

A guide published by the HKMA sets out the scope of the Framework’s application, competency standards, qualification structure, certification and grandfathering arrangements, and CPD (continuing professional development) requirements.

Although not a mandatory licensing regime, the HKMA encourages authorised institutions to adopt the Framework as a benchmark for boosting the level of professional competence of credit risk management practitioners.

In particular, institutions are advised to support staff training and examinations, and to keep records of the such training and staff qualifications. They should also provide staff with necessary assistance in relation to applications for grandfathering and certification, and fulfilment of CPD training.

The HKMA will take into account authorised institutions’ implementation progress and their efforts to enhance staff competence and on-going development during its supervisory process.

As the administrator of the Framework, the HKIB’s main role is to handle certification and grandfathering applications, administer examinations and CPD requirements, and maintain a public register of qualified certification holders.

The HKMA’s circular, the Framework, and the related guide are available here.

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