Featured Product

    HKMA Retains List of Designated D-SIBs Announced in December 2019

    December 30, 2020

    HKMA retained the list of authorized institutions designated as domestic systemically important banks (D-SIBs), as published on December 24, 2019, post its annual assessment of the D-SIBs list. The Higher Loss Absorbency requirements also remain unchanged from those published on December 24, 2019. The D-SIBs in bucket 1, which have an Higher Loss Absorbency requirement of 1%, are Bank of East Asia Limited, Hang Seng Bank Limited, and Industrial and Commercial Bank of China (Asia) Limited. The D-SIBs in bucket 2, which have an Higher Loss Absorbency requirement of 1.5%, are Bank of China (Hong Kong) Limited and Standard Chartered Bank (Hong Kong) Limited. Additionally, HSBC Limited has been included in bucket 4, with an Higher Loss Absorbency requirement of 2.5%.

    Under the D-SIB framework, each authorized institution designated as a D-SIB will be required to include a Higher Loss Absorbency requirement into the calculation of their regulatory capital buffers within a period of 12 months after the formal notification of its designation. The Higher Loss Absorbency requirement applicable to a D-SIB (expressed as a ratio of an authorized institution’s Common Equity Tier 1 capital to its risk-weighted assets as calculated under the Banking (Capital) Rules) ranges between 1.0% and 3.5%. There are five Higher Loss Absorbency buckets, though only the first four buckets (from 1% to 2.5%) have been populated so far and the 3.5% bucket is empty, encouraging D-SIBs to refrain from becoming even more systemically important.

    The Banking (Capital) Rules and the HKMA regulatory framework for D-SIBs follow the provisions in “A framework for dealing with domestic systemically important banks” issued by the Basel Committee in October 2012. The legislation enables HKMA to designate an authorized institution as a D-SIB if HKMA considers the authorized institution to be of domestic systemic importance and to require an authorized institution designated as a D-SIB to be subject to an Higher Loss Absorbency capital buffer.  The Higher Loss Absorbency applied to a D-SIB serves (together with the Countercyclical Capital Buffer) as an extension of the Basel III Capital Conservation Buffer. Accordingly, if and when the common equity tier 1 capital ratio of a D-SIB falls within the extended buffer range, restrictions will be imposed on the discretionary distributions of the D-SIB. This results in D-SIBs being required to retain earnings to bolster their regulatory capital.

     

    Keywords: Asia Pacific, Hong Kong, Banking, Basel Regulatory Capital, Systemic Risk, D-SIBs, HLA Requirement, HKMA

    Featured Experts
    Related Articles
    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
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    MAS Revises Guidelines on Technology Risk Management

    MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6462