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

    BIS Innovation Hub Sets Out Work Program for 2021

    BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.

    January 22, 2021 WebPage Regulatory News
    News

    EC Plans to Consult on Crisis Management and EDIS Framework Revisions

    In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.

    January 21, 2021 WebPage Regulatory News
    News

    EBA Finalizes Remuneration Standards for Investment Firms in EU

    EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).

    January 21, 2021 WebPage Regulatory News
    News

    ECA Recommends Actions to Enhance Resolution Planning for Banks

    EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.

    January 20, 2021 WebPage Regulatory News
    News

    BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK

    BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.

    January 20, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules on Identity Verification of Depositor Protection

    PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).

    January 20, 2021 WebPage Regulatory News
    News

    FSB Publishes Work Program for 2021

    FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.

    January 20, 2021 WebPage Regulatory News
    News

    FCA Issues Update on Move to New Data Collection Platform

    FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.

    January 20, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Derivation Rules for Reporting by Banks

    Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.

    January 19, 2021 WebPage Regulatory News
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6488