HKMA announced that the countercyclical capital buffer (CCyB) for Hong Kong is being reduced from 2.0% to 1.0%, with immediate effect. The power to implement the CCyB in Hong Kong is provided by the Banking (Capital) Rules, which enable HKMA to announce a CCyB ratio for Hong Kong. The CCyB requirement applicable to a given authorized institution is expressed as a percentage of its common equity tier 1 capital to its total risk-weighted assets.
In setting the CCyB ratio HKMA considered a series of quantitative indicators and qualitative information including an “indicative buffer guide.” The latest indicative buffer guide, calculated based on the 2019 fourth quarter data, signals a CCyB of 1.75%. The projection based on all available data, however, suggests that the indicative buffer guide would very likely signal a lower CCyB than this when all relevant 2020 quarter 1 data become available. CCyB is part of the Basel III regulatory capital framework. It is a mechanism to build up additional capital during periods of excessive credit growth when risks of system-wide stress are observed to be growing markedly. This capital can then be “released” when the credit cycle turns to absorb losses and enable the banking system to continue lending in the subsequent downturn.
Keywords: Asia Pacific, Hong Kong, Banking, Basel III, CCyB, Regulatory Capital, Banking Capital Rules, CET1, HKMA
Previous ArticleHKMA Publishes Second Issue of Regtech Watch Newsletter
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.
The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.