HKMA has decided to lower the regulatory reserve requirement on locally incorporated authorized institutions by 50%, with immediate effect. HKMA has found that the need for locally incorporated authorized institutions to maintain a regulatory reserve on top of accounting provisions has diminished. Thus, HKMA has decided to lower the regulatory reserve requirement for authorized institutions to provide authorized institutions with a greater lending headroom to support customers to cope with the COVID-19 outbreak. The mechanism for determining the level of regulatory reserve reduction for individual authorized institutions and the consequential adjustment to the target rate for the calculation of the benchmark regulatory provision is set out in the Annex to the recent HKMA circular.
At the time of implementation of Hong Kong Financial Reporting Standard (HKFRS) 9 in January 2018, HKMA considered it prudent to continue requiring locally incorporated authorized institutions to maintain a regulatory reserve on top of accounting provisions. This decision was made taking into consideration that potential gaps might exist, at least initially, regarding the data, systems and controls required in determining expected credit loss provisions under HKFRS 9.
With HKFRS 9 having been implemented for more than two years, HKMA observes that locally incorporated authorized institutions have made good progress in enhancing their expected loss provisioning models, systems, and controls. The locally incorporated authorized institutions reported notable increases in their accounting provisions for the second half of 2019, given the deterioration in the economic environment. This indicates that the “expected loss” provisioning requirement under HKFRS 9 is robust and responsive to changes in external conditions. Accordingly, the need for locally incorporated authorized institutions to maintain a regulatory reserve on top of accounting provisions has diminished.
HKMA expects that the regulatory reserve release should not be used for dividend distribution, share buyback, or payment of bonus to senior management. HKMA will keep the situation under regular review and will continue to assess the implementation of HKFRS 9 by locally incorporated authorized institutions to see if any further adjustment to the regulatory reserve requirement is warranted in the future.
Keywords: Asia Pacific, Hong Kong, Banking, Accounting, COVID-19, HKFRS 9, ECL, Regulatory Capital, IFRS 9, HKMA
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.