Featured Product

    HKMA Consults on Market Risk Capital Requirements for Banks

    June 28, 2019

    HKMA published a consultation paper sets out its proposal for revising the current regulations on the market risk capital charges in the Banking (Capital) Rules (BCR). The consultation paper outlines the HKMA plans for implementing the revised market risk framework in Hong Kong, in line with the minimum capital requirements for market risk, which the Basel Committee published in January 2019. Comment period for the proposal ends on September 30, 2019. HKMA intends to implement the new standards by January 01, 2022, in line with the BCBS timeline. Locally incorporated authorized institutions would be required to start regulatory reporting based on the new standards from January 01, 2022, with the first regulatory reporting date being January 31, 2022.

    The proposal covers the new Standardized Approach, the new Internal Models Approach, the Simplified Standardized Approach, requirements related to the boundary between the trading book and banking book, and details on the qualifying criteria for using de-minimis exemptions. All authorized institutions, except for those that are allowed to use the Simplified Standardized Approach or qualify for the de-minimis exemption, should calculate the capital charges using the Standardized Approach. Under the revised market risk framework, market risk is defined as the risk of losses arising from movements in market prices. The risks subject to market risk capital charges include interest rate risk, credit spread risk, equity risk, foreign exchange risk, commodities risk, and default risk for trading book instruments; in addition to the foreign exchange risk and commodities risk for banking book instruments. Although regular reporting will in principle take place only at intervals, an authorized institution is expected to:

    • Manage its market risk in such a way that the capital charges are being met at any time. The authorized institution must not window-dress by showing systematically lower market risk positions on reporting dates.
    • Maintain strict risk management systems to ensure that intra-day exposures are not excessive. If an authorized institution fails to meet the capital charges at any time, it should take immediate measures to rectify the situation.

    Authorized institutions planning to adopt the Internal Models Approach with effect from January 01, 2022 should start discussing their implementation plans with their usual supervisory contact at the HKMA by December 2019 and inform the HKMA of such plans in writing by March 31, 2020. An implementation plan should at least include an outline of key characteristics of the internal models and clearly state the intended implementation timeline, the proposed trading desk structure, and the market risk exposures intended to be covered. Authorized institutions planning to adopt the Simplified Standardized Approach with effect from January 01, 2022 should submit a written application to their usual supervisory contact at HKMA by December 31 , 2020. HKMA will notify individual  authorized institutions by January 29, 2021 whether they are considered eligible to use the Simplified Standardized Approach.

     

    Comment Due Date: September 30, 2019

    Keywords: Asia Pacific, Hong Kong, Banking, Market Risk, Regulatory Capital, Standardized Approach, Internal Model Approach, Simplified Standardized Approach, Basel III, Banking Capital Rules, HKMA

    Featured Experts
    Related Articles
    News

    FASB Proposes Improvements to Derivatives and Hedging Standard

    FASB proposed an Accounting Standards Update, on codification improvements to hedge accounting under Topic 815, to clarify certain sections of the 2017 hedge accounting standard (Update 2017-12).

    November 13, 2019 WebPage Regulatory News
    News

    FASB Approves Guidance to Assist in Transition to New Reference Rates

    FASB approved an Accounting Standards Update (Topic 848) to provide temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the reference rate reform on financial reporting.

    November 13, 2019 WebPage Regulatory News
    News

    BIS and MAS Launch Innovation Hub in Singapore

    BIS and MAS launched the BIS Innovation Hub Center in Singapore.

    November 13, 2019 WebPage Regulatory News
    News

    MAS Collaborates on Research Platform to Support Fintech Investments

    MAS, Deloitte, and S&P Global Market Intelligence have collaborated to develop a prototype for an industry-wide Fintech Research Platform to help investors and financial institutions connect with fintech start-ups that they can partner with or invest in.

    November 12, 2019 WebPage Regulatory News
    News

    MAS and CSA Sign Agreement to Strengthen Collaboration in Fintech

    MAS and eight members of the Canadian Securities Administrators (CSA) signed a cooperation agreement to strengthen collaboration in fintech between Singapore and CSA’s member jurisdictions.

    November 12, 2019 WebPage Regulatory News
    News

    APRA Consults to Standardize Submission Date for Quarterly Reporting

    APRA proposed to standardize quarterly reporting due dates for authorized deposit-taking institutions. The proposed standardized due date is 35 calendar days after the last day of the reference quarter, which will create a 14-calendar-day extension for credit unions and building societies.

    November 08, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: First Update for November 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to two questions. The answers provide clarifications on topics related to own funds and strong customer authentication under the revised Payment Services Directive or PSD2.

    November 08, 2019 WebPage Regulatory News
    News

    FED Proposes to Extend Initial Compliance Dates Under SCCL Rule

    FED published a proposal to extend, by 18 months, the initial compliance dates for foreign banks subject to the single-counterparty credit limit (SCCL) rule.

    November 08, 2019 WebPage Regulatory News
    News

    EBA Publishes Technical Package on Reporting Framework 2.9.1

    EBA published a new release of the reporting framework 2.9.1. This release includes validation rules, Data Point Model (DPM) data dictionary, XBRL taxonomy, and other supporting documents. Additionally, the release fixes some modeling issues on COREP Liquidity and FINREP.

    November 08, 2019 WebPage Regulatory News
    News

    EBA Report Examines Progress in Addressing Nonperforming Loans in EU

    EBA published a report that examines the progress toward addressing the nonperforming loan (NPL) issue in Europe.

    November 08, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4131