The Hong Kong Monetary Authority (HKMA) is consulting the banking industry on the implementation of Pillar 3 disclosure requirements under the Basel III final reform package. Annex I of the consultation paper provides a tabulated summary of the tables and templates for implementing the new and revised disclosure requirements, along with their respective reporting frequencies and proposed implementation dates. Annex II illustrates the first reporting periods for the proposed disclosure requirements. The consultation on Pillar 3 disclosures closes on January 19, 2022. HKMA also proposed revisions to the Supervisory Policy Manual Modules TM-G-2 on business continuity planning and OR-1 on operational risk management, in addition to the new Module OR-2 on operational resilience. The consultation period for the Policy Modules ends on February 04, 2022.
Consultation on Pillar 3 Disclosure Requirements
This consultation addresses the implementation of certain disclosure requirements published by BCBS in December 2018, June 2019, and November 2021. These requirements include the following:
- Revisions and additions to the Pillar 3 framework arising from the finalization of the Basel III final reform package, including revised disclosure requirements for credit risk, operational risk, leverage ratio, credit valuation adjustment, and overview of risk management, risk-weighted assets, and key prudential metrics
- New disclosure requirements to compare risk-weighted asset outcome of internal models of banks, with risk-weighted assets calculated according to the full standardized approaches
- New disclosure requirements on asset encumbrance
- Revisions to the disclosure requirements on leverage ratio
- Revisions to the disclosure requirements on market risk
Consultation on Policy Modules
- SPM Module on Operational Risk Management—HKMA proposed to revise this module, which sets out the approach that HKMA will adopt toward the supervision of authorized institutions’ operational risk and to provide guidance to authorized institutions on the key elements of effective operational risk management. Each authorized institution should develop and maintain an appropriate operational risk management framework that is effective and efficient in identifying, assessing, monitoring, and controlling/mitigating operational risk, taking into account its complexity, range of products and services, organizational structure, and risk management culture.
- SPM Module on Operational Resilience—This newly proposed Policy Module sets out the supervisory approach to operational resilience and provides authorized institutions with guidance on the general principles that they are expected to consider when developing their operational resilience framework. HKMA will consider an authorized institution to be operationally resilient if it is able to identify and mitigate risks that may threaten delivery of critical operations, continue to deliver critical operations when disruptions occur, resume normal operations in a timely manner after disruptions occur, and absorb learnings from disruptions or near-misses.
- SPM Module on Business Continuity Planning—HKMA proposed to revise this module, which sets out the supervisory approach to business continuity planning and the sound practices, which HKMA expects authorized institutions to consider. An effective business continuity plan is forward-looking and should be validated for a range of severe but plausible scenarios that contain disruptive events and incidents. The business continuity plan should identify critical operations as well as the key internal and external dependencies supporting these critical operations. It should incorporate business impact analysis, recovery strategies, testing programs, training and awareness programs, communication strategies, and crisis management processes.
Comment Due Date: January 19, 2022 (Disclosure Requirements)/February 04, 2022 (Policy Modules)
Keywords: Asia Pacific, Hong Kong, Banking, Basel, Pillar 3, Disclosures, Supervisory Policy Manual, Business Continuity, Operational Risk, Operational Resilience, Credit Risk, Market Risk, CVA Risk, HKMA
Previous ArticleSBV Publishes Multiple Regulatory Updates in December 2021
The European Banking Authority (EBA) published its work program for 2023 as well as the technical package for phase 3 of version 3.2 of its reporting framework.
The Board of Governors of the Federal Reserve System (FED) announced a pilot climate scenario analysis exercise for six largest banks in the U.S.
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
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).