Paper 10 Exam Study Guide (2026)
Everything the HKSI LE Paper 10: Credit Rating Services tests, topic by topic: what each section covers, the facts that come up most, and how to study it. Pair it with the free 15-question practice test.
The exam at a glance
| Questions | 40 multiple-choice questions |
|---|---|
| Time | 60 minutes |
| Passing score | 70% |
| Format | Closed book, computer-based |
| Certifying body | Hong Kong Securities and Investment Institute (HKSI Institute) |
| Test provider | HKSI Institute computer-based test centre in Hong Kong, or Prometric centres outside Hong Kong |
Mind map: the whole exam on one screen
Read the complete Paper 10 study notes for “Credit as a Financial Discipline”
Our first full set of comprehensive notes, about 10 minutes of reading: What is credit? · Debt versus equity · Credit risk, default and the stages of deterioration · Credit risk versus market risk · Reading credit quality from financial statements · Debt capital markets and pricing, a worked exam example, the traps examiners use and a one-minute recap. Create a free account to read it and see how premium notes work before you decide.
1. Credit as a Financial Discipline
What credit is, how debt differs from equity, and how credit risk is measured and priced.
Key facts
- Credit is the exchange of present resources for a promise of future repayment, enforceable by law.
- Debt holders have contractual, priority claims with fixed payments; equity holders hold the residual ownership claim with voting rights but no fixed entitlement.
- Credit risk is the risk of loss from a borrower failing or being unwilling to meet obligations; default is failure to pay principal or interest on time.
- Credit risk differs from market risk: it is essentially downside risk tied to the obligor, not two-sided price risk.
- The transition matrix shows the probability of a rating migrating between grades over a set period.
- Bond yield = base rate + credit spread; weaker credit means a wider spread.
Flashcards
Exam tip: In credit versus market risk questions, remember credit risk is largely one-sided downside risk driven by the obligor.
2. The Credit Rating Industry
What ratings are, who produces them and how they are regulated.
Key facts
- The Big Three are Moody's, S&P Global Ratings and Fitch Ratings.
- Ratings are ordinal: they rank relative creditworthiness, they do not state an exact probability of default.
- Issuer ratings address capacity to meet senior unsecured obligations; issue ratings can differ for secured or subordinated debt.
- S&P and Fitch: AAA to BBB- is investment grade, BB+ and below speculative. Moody's: Aaa to Baa3 investment grade, Ba1 and below speculative.
- Providing credit rating services is Type 10 regulated activity under the SFO, licensed by the SFC and governed by the SFC Code of Conduct for Persons Providing Credit Rating Services; a credit analysis used solely by the person who requested it, and not distributed to subscribers or the public, falls outside the regulated activity.
- Under the issuer-pays model the agency is paid by those it rates, creating conflicts of interest; alternative providers such as Morningstar DBRS and market-data analytics firms complement the Big Three.
Flashcards
Exam tip: Memorize the investment grade boundaries on both the S&P/Fitch and Moody's scales; they are easy marks.
3. The Credit Rating Process
How ratings are produced, controlled and communicated.
Key facts
- Typical stages: engagement and acceptance, information gathering and analysis, rating committee decision, publication, then ongoing surveillance.
- Commercial staff who negotiate fees must be separate from analysts who prepare ratings (SFC Code of Conduct for CRAs and the IOSCO Code).
- Through-the-cycle ratings stay broadly stable across the cycle; point-in-time ratings track current conditions and move faster.
- Backtesting compares actual defaults with what the ratings implied, validating and improving methodologies.
- Methodology changes must be developed systematically, applied consistently and communicated transparently to users.
- Agencies communicate through rating action releases, published criteria, disclosure of limitations, complaints handling and dialogue with different user groups.
Flashcards
Exam tip: Know which controls are internal (committees, backtesting, surveillance) and which are external (SFC regulation, the IOSCO Code, market scrutiny).
Test yourself on these topics
Take the free 15-question Paper 10 test, then save your results to unlock your Readiness Score and the mistakes bank.
4. Corporate Credit Ratings
Rating factors, ratios, covenants and ceilings for corporate issuers.
Key facts
- Corporate analysis weighs country risk, sector and industry factors, and company-specific factors such as management and competitive position.
- Key ratios: leverage (debt/EBITDA), coverage (EBIT/interest), profitability measures and cash flow measures such as funds from operations.
Flashcards
Exam tip: Scenario questions on covenants and ratios are common: classify the covenant first, then ask who it protects.
5. Bank and NBFI Credit Ratings
How banks, insurers, securities firms and asset managers are rated.
Key facts
- Bank ratings start with a standalone assessment of intrinsic strength, then add notches for group or government support.
- Bank failure usually reflects weak asset quality, funding and liquidity problems and insufficient capital.
Flashcards
Exam tip: For any financial institution question, first decide whether the rating is standalone or includes support uplift.
6. Public Sector Enterprise Credit Ratings
Ratings for SOEs, LGFVs and other government-linked borrowers.
Key facts
- PSE definitions vary by jurisdiction but generally cover entities owned or controlled by governments that issue debt.
- In Mainland China, distinguish local government bonds (direct government obligations), SOEs (debt in the enterprise's own name) and LGFVs (vehicles whose debt is corporate, not direct government debt).
Flashcards
Exam tip: In Mainland China PSE questions, the key is whether the debt is a direct government obligation or a corporate obligation of an SOE or LGFV.
7. Structured Finance Credit Ratings
Securitization structures and how tranches are rated.
Key facts
- Securitization pools assets (mortgages, auto loans, credit cards, corporate loans) and sells them to a bankruptcy-remote SPV that issues rated tranches.
- Major types include RMBS, CMBS, consumer ABS, CLOs and CDOs.
Flashcards
Exam tip: Structured ratings test expected loss at the tranche level, so always ask where the tranche sits in the loss waterfall.
8. Sovereign Credit Ratings
Sovereign rating types, criteria and limitations.
Key facts
- Sovereign risk is a government's willingness and ability to service its own debt; country risk also covers transfer and convertibility risks affecting all issuers in the country.
- Most agencies rate local-currency and foreign-currency debt separately, with foreign-currency ratings typically no higher.
Flashcards
Exam tip: Local-currency versus foreign-currency ratings is a favorite exam angle: it turns on the ability to print the currency owed.
How to pass
- 40 questions in 60 minutes is 90 seconds each.
- You need 70%: 28 out of 40, so you can only miss 12.
- Know the scales cold: investment grade runs to BBB- on the S&P and Fitch scales and to Baa3 on the Moody's scale, and lower grades are speculative grade.
- For any issuer type (bank, corporate, sovereign), first ask whether the rating is standalone or includes uplift for support, and whether the rating is capped by a sovereign or country ceiling.
Frequently asked questions
How long should I study for the Paper 10 exam?
Most working candidates need 4 to 8 weeks at 45 to 60 minutes a day. Book your exam once your Readiness Score has stayed at 80 or higher for about a week.
Can I take the Paper 10 exam online?
Yes. Paper 10 can be taken at the HKSI Institute's computer-based test centre in Hong Kong or, for candidates outside Hong Kong, at a Prometric centre (higher fee). Format: closed book, computer-based. Check the HKSI Institute's current candidate information for the rules.
What score do I need to pass the Paper 10 exam?
70%. The exam has 40 multiple-choice questions and a time limit of 60 minutes.
What are the most tested topics?
The outline covers credit as a financial discipline, the credit rating industry, the credit rating process, corporate credit ratings, bank and nbfi credit ratings, public sector enterprise credit ratings, structured finance credit ratings, sovereign credit ratings. Use the free practice test to see which ones you need most.
The premium Paper 10 study path
Premium Paper 10 prep is studied one topic at a time. Each step starts with that topic's key notes and flashcard deck, then its own question sets of 25, so you master one topic before you move to the next. When every topic is strong, the 6 full mock exams show you're ready.
Your step-by-step study path
- 1Credit as a Financial Discipline8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Notes free with an account
- 2The Credit Rating Industry8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Premium
- 3The Credit Rating Process8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Premium
- 4Corporate Credit Ratings8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Premium
- 5Bank and NBFI Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Premium
- 6Public Sector Enterprise Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Premium
- 7Structured Finance Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Premium
- 8Sovereign Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25Premium
- Final step: 6 full mock exams50 questions each, timed like test day. Pass them, then book your exam.Premium
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Summarized from the HKSI Institute's official candidate information and the rules cited, checked October 2026. Confirm current requirements with Hong Kong Securities and Investment Institute (HKSI Institute).