What is the threshold for concentration risk disclosure?

The threshold for concentration risk disclosure is primarily set at 10 percent. This means that if any single investment, loan, or group of investments constitutes 10 percent or more of a financial institution's total assets, it must be disclosed to provide transparency regarding potential risks associated with that concentration. This disclosure requirement is in place to ensure that stakeholders understand the potential vulnerabilities related to having significant exposure to particular assets or counter-parties, thus helping them assess the risk profile of the institution.

A 5 percent threshold, while it may seem like a conservative measure, does not align with the generally accepted standard for concentration risk disclosure, which tends to emphasize the importance of a higher percentage that reflects a more significant risk exposure. By setting the disclosure threshold at 10 percent, the emphasis is placed on material concentrations that could impact the entity's financial health more critically.