Featured Product

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    July 29, 2021

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions. Also revised was the policy manual CS-1 that sets out the group-wide approach currently adopted by HKMA for locally incorporated authorized institutions where they form part of a financial or a commercial group, either as the head of the group, or as one of the member companies of the group. Authorized institutions are expected to review whether their remuneration systems are consistent with the principles set out in the revised module and, if needed, to adopt all necessary changes as soon as practicable, no later than January 01, 2022.

    Policy Module on Group-Wide Supervision. In Hong Kong, the structure of a group of which an authorized institution forms a part generally falls into one or more of the three categories. Type one is where an authorized institution is heading a financial group with subsidiaries engaging predominantly in providing financial services, such as banking, securities and insurance. Type two is where the authorized institutions and its subsidiaries form part of an international banking group or other supervised financial group. Type three is where an authorized institutions and its subsidiaries are part of a group that is headed by an unregulated holding company which controls entities engaging in financial activities or a wider range of financial and non-financial activities. The Policy module on group-wide supervision was revised primarily to:

    • Reflect the current supervisory approach and practices adopted by HKMA in relation to a locally incorporated authorized institution where it forms part of a banking, financial, or commercial group
    • Incorporate relevant principles in international standards concerning the supervision of financial conglomerates
    • Cater for consequential changes arising from amendments to the Banking Ordinance, relevant rules made under the Ordinance and supervisory guidelines.

    Policy Module on Remuneration. This module sets out the supervisory expectations with regard to remuneration practices of authorize institutions. This module focuses on the governance and control arrangements for, and operation of, authorized institutions’ remuneration systems in the context of the incentives for risk-taking they may create. Authorized institutions are expected to establish and operate their remuneration policies, structures, and incentive awards with due regard to the principles set out in this module. The changes incorporated in the revised policy module are mainly to:

    • Update the existing guidelines following the most recent guidance issued by the Financial Stability Board on sound remuneration practices, and in particular on the use of remuneration tools to address potential misconduct risks
    • Strengthen the Board oversight on the formulation and implementation of remuneration systems and related control processes
    • Provide guidance in relation to the adoption of group remuneration policies and approval of remuneration packages of senior management and Key Personnel for foreign bank branches
    • Update the existing guidelines to align with the remuneration disclosure requirements in the Banking (Disclosure) Rules

    Keywords: Asia Pacific, Hong Kong, Banking, Banking Ordinance, Group-Wide Supervision, Supervisory Policy Manual, CG-5, CS-1, Remuneration, Disclosures, Governance, ESG, HKMA

    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News
    News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News
    News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582