Featured Product

    HKMA Revises Policy Modules Related to Banking Exposure Limits Rules

    December 27, 2019

    HKMA published revised versions of five Supervisory Policy Manual modules, in the Gazette, as statutory guidelines under the Banking Ordinance. All of these modules relate to the guidance on Banking (Exposure Limits) Rules (BELR). The Supervisory Policy Manual modules are CR-G-8 on “Large Exposures and Risk Concentrations,” CR-G-9 on “Exposures to Connected Parties,” CR-L-1 on “Consolidated Supervision of Concentration Risks: Banking (Exposure Limits) Rules (BELR)—Rule 6,” CR-L-3 on “Letters of Comfort: BELR Rule 57(1)(d),” and CR-L-4 on “Underwriting of Securities: BELR.” HKMA also revised the Glossary module, which contains a list of abbreviations and common terms used in the Supervisory Policy Manual.

    The CR-L-1 Module on consolidated supervision of concentration risks has been revised in response to the recommendations from an assessment team formed by BCBS in the context of the Regulatory Consistency Assessment Program (RCAP); the BCBS assessment team has recently reviewed the local implementation of BCBS standards on large exposures. The changes are mostly editorial in nature and are intended to make explicit, in the text, the current policy of HKMA to require compliance with the statutory limits on a consolidated basis so that it is more apparent that the regulations conform to the relevant standards. The revisions to the other four modules are incidental to the implementation of the BELR, which has replaced the provisions related to exposure limits formerly set out in Part XV of the Banking Ordinance. The majority of the revisions in these Supervisory Policy Manual modules relate to replacing cross-references to obsolete Banking Ordinance provisions with those of the BELR. Other key changes include the following:

    • For CR-G-8 and CR-G-9, clarification and implementation guidance on Parts 7 and 8 of the BELR, respectively, have been incorporated. CR-G-8 also introduces a new requirement for locally incorporated authorized institutions to set an internal limit on aggregate intragroup exposures; the requirement is expressed as a percentage of the tier 1 capital of an authorized institution.
    • For CR-L-3, the primary change is to cease acceptance of existing letters of comfort issued by holding companies of authorized institutions after June 30, 2020. This addresses the legacy issue of treating letters of comfort as an acceptable credit risk mitigation tool, which is not consistent with the latest BCBS large exposures standards. In response to a recommendation from the recent RCAP review, the revised module specifies that HKMA, in the future, would only accept letters of comfort issued by the Government for the Hong Kong Mortgage Corporation Limited and its subsidiaries.
    • For CR-L-4, an authorized institutions that engages or plans to engage in the underwriting business still needs to establish and implement necessary internal control policies and limits; however, agreement of such policies and limits with HKMA in advance is no longer required. HKMA may review the relevant documentation and internal control processes during the course of its risk-based supervisory processes.

    Keywords: Asia Pacific, Hong Kong, Banking, BELR, Supervisory Policy Manual, Large Exposures, Banking Ordinance, RCAP, Concentration Risk, Credit Risk, BCBS, HKMA

    Featured Experts
    Related Articles
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    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.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    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).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    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.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    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)

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    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.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    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.

    September 14, 2022 WebPage Regulatory News
    News

    ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies

    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)

    September 13, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    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.

    September 12, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8514