Featured Product

    HKMA Revises Supervisory Policy Module on Capital Adequacy Regime

    June 19, 2020

    HKMA revised the Supervisory Policy Manual module on the overview of capital adequacy regime for locally incorporated authorized institutions, as a statutory guideline under the Banking Ordinance. This module sets out the HKMA policy related to the framework for calculation of capital adequacy ratio of covered institutions. The HKMA policy on capital adequacy closely reflects the latest regulatory capital standards published by BCBS.

    The changes incorporated in the revised Supervisory Policy Manual module are mainly to:

    • Revise the guidance on the self-assessment of proposed capital instruments to be included within an authorized institution's capital base so as to align with the equivalent guidance in the Code of Practice "Resolution Planning - LAC Requirements" (LAC-1)
    • Update the guidance in relation to capital buffer, revised securitization framework, sovereign concentration risk, leverage ratio, and interest rate risks in the banking book to reflect the current capital regime in Hong Kong (in terms of both legal framework and associated supervisory practices)
    • Outline the plan of HKMA to implement the remaining BCBS capital standards, covering those in relation to the Basel III final reform package

    Under the updated section on the implementation plan of HKMA, the policy manual states that the Banking (Capital) (Amendment) Rules 2020 will take effect on June 30, 2021 for implementation of the BCBS capital standards on the treatment of counterparty credit risk (CCR) exposures of banks—that is, the standardized approach for measuring CCR exposures (SA-CCR) and capital requirements for bank exposures to CCPs. In addition, the proposed amendments to the Banking Capital Rules for implementation of the BCBS standard on the capital requirements for banks’ equity investments in funds (EIF standard) are being prepared in consultation with the industry. The EIF standard clarified the existing capital treatment for equity investments in investment funds under Basel II by introducing enhancements to reflect directly the risks associated with a fund’s underlying investments and its leverage. The updated module also indicates that the implementation of the Basel III final package and the revised market risk framework has been deferred by one year to January 01, 2023 to provide additional operational capacity for banks and supervisors in addressing the impact of COVID-19 on the global banking system. HKMA will have regard to the revised implementation timeline in devising its implementation proposals for Hong Kong in consultation with the industry.

     

    Keywords: Asia Pacific, Hong Kong, Banking, Supervisory Policy Manual, Capital Adequacy, Basel III, Banking Ordinance, Resolution Planning, IRRBB, Leverage Ratio, BCAR, COVID-19, Regulatory Capital, Securitization Framework, BCBS, HKMA 

    Featured Experts
    Related Articles
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7291