Featured Product

    HKMA Publishes CoP on Loss-Absorbing Capacity Requirements of Banks

    March 20, 2019

    HKMA issued, in relation to the Financial Institutions Resolution (Loss-Absorbing Capacity Requirements—Banking Sector) Rules (LAC Rules) a chapter of a code of practice (LAC CoP) under section 196 of the Financial Institutions Resolution Ordinance (FIRO). The LAC Rules, which came into operation on December 14, 2018, give certain discretionary powers to the Monetary Authority as resolution authority for the banking sector. The LAC CoP provides guidance on how HKMA intends to exercise those powers, including the power to classify authorized institutions and certain of their group companies as "resolution entities" or "material subsidiaries." Those entities will then be required to maintain minimum levels of loss-absorbing capacity (LAC).

    The LAC CoP sets out the planning assumption of HKMA that where the total consolidated assets of a Hong Kong incorporated authorized institution exceed HKD 300 billion, LAC requirements should be imposed. The primary purpose of this chapter is to provide guidance on how HKMA as the resolution authority intends to exercise certain discretionary powers under the LAC Rules, and on the operation of certain provisions of the LAC Rules. This chapter is not designed to provide a comprehensive overview of requirements imposed by the LAC Rules. A draft of the LAC CoP was issued for consultation last year during October 19, 2018 to December 03, 2018). A total of seven submissions were received. HKMA has carefully reviewed all comments, and reflected them in the final version of the LAC CoP, where appropriate.  

    The LAC Rules provide for the imposition of LAC requirements on Hong Kong incorporated AIs and certain of their Hong Kong incorporated group companies (that is, classifiable entities). In relation to the timing of implementation of LAC requirements, the resolution authority intends that, apart from any entities to which rule 32 of the LAC Rules applies, no domestic systemically important bank (or group company thereof) will be required to meet any LAC requirement any earlier than January 01, 2022 and no other authorized institution (or group company thereof) will be required to meet any LAC requirement any earlier than January 01, 2023.

    Keywords: Asia Pacific, Hong Kong, Banking, TLAC, Loss Absorbing Capacity, Resolution, Code of Practice, HKMA

    Featured Experts
    Related Articles
    News

    HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol

    HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.

    October 16, 2020 WebPage Regulatory News
    News

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).

    October 16, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on BRRD2 Transposition

    HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).

    October 15, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on CRD5 Transposition

    HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.

    October 15, 2020 WebPage Regulatory News
    News

    PRA Updates Supervisory Statement on Counterparty Credit Risk

    PRA published the final policy statement PS22/20, which contains the updated supervisory statement SS12/13 on counterparty credit risk.

    October 14, 2020 WebPage Regulatory News
    News

    FSB Publishes Update on Work to Address Market Fragmentation

    FSB published an update on its work to address market fragmentation. FSB is working in this area in collaboration with the other standard-setting bodies.

    October 14, 2020 WebPage Regulatory News
    News

    EBA Proposes to Revise Guidelines on Incident Reporting Under PSD2

    EBA proposed revisions to the guidelines on major incident reporting under the second Payment Service Directive (PSD2).

    October 14, 2020 WebPage Regulatory News
    News

    EBA Finalizes Standards for Prudential Treatment of Software Assets

    EBA published the final draft regulatory technical standards specifying the methodology for prudential treatment of software assets by banks.

    October 14, 2020 WebPage Regulatory News
    News

    FSB Publishes Roadmap on Cross-Border Payments, Report on Stablecoins

    FSB published a report presenting the roadmap to enhance cross-border payments by providing a high-level plan that sets ambitious but achievable goals and milestones in the five focus areas.

    October 13, 2020 WebPage Regulatory News
    News

    EIOPA Urges Insurers to Prepare for End of Brexit Transition

    In a recent communication, EIOPA urged the insurance sector to complete its preparations for the end of the Brexit transition period on December 31, 2020.

    October 13, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5959