Featured Product

    IMF Publishes Report on 2019 Article IV Consultation with Macao

    May 09, 2019

    IMF published its staff report under the 2018 Article IV consultation with the People's Republic of China-Macao Special Administrative Region (SAR). The IMF Directors concurred that the financial sector remains sound with healthy liquidity and asset quality. They welcomed the steps taken to strengthen supervision and regulatory cooperation across jurisdictions. Given the large size of the financial sector and the significant short-term foreign liabilities, Directors called for continued supervisory caution, including for sound fintech adoption. Directors agreed that the current housing macro-prudential stance and related measures appear broadly appropriate and that systemic risks in the housing market seem broadly contained.

    The staff report highlights that balance sheets of the banking system continue to suggest that the sector remains sound, but ongoing attention to large short-term foreign liabilities and to the quality and liquidity of foreign assets is needed. Foreign banks are the bulk of the financial system and they constitute 24 foreign branches and subsidiaries and four local banks. The large scale of the banking system (about 400% of GDP in total assets) calls for continued supervisory caution. Domestic operations remain strong regarding liquidity and asset quality, helped by moderate private-sector leverage. The external side of the banking sector balance sheet shows large foreign liabilities, over 65% short-term, increasing funding risks. Regarding risks to foreign assets, given the significant bank exposure to the Mainland (about 30% of external assets), recent efforts by the Monetary Authority of Macao (AMCM) and PBC to strengthen financial supervisory and regulatory cooperation, with plans to set up an information exchange framework, are welcome.

    The authorities reported on satisfactory results from regular stress tests on banks’ assets, including from shocks to the real estate portfolio and the Mainland exposure. The current housing macro-prudential stance and related fiscal measures appear broadly appropriate. With new measures in place in 2017 and 2018, systemic risks in the housing market appear broadly contained. Further actions should take into account evolving market conditions, including the recent growth deceleration and leveling-off in residential property prices. If residential property prices resume strong growth and pose a risk to financial stability, the authorities could consider tightening macro-prudential and/or fiscal-based measures. The authorities are encouraged to replace the residency-based differentiation in the loan-to-value (LTV) framework with alternative measures. Housing affordability concerns should be addressed by a broad set of supply policies, including advancing regulatory policy within a transparent framework that supports private sector supply and boosts well-targeted public housing supply.

    The report notes that the AMCM could further strengthen the framework for sound fintech adoption. Measures could be taken to further increase cyber resilience in financial institutions and fintech firms, to promote regtech to reduce regulatory costs, and incentivize fintech firms to participate in a regulatory sandbox. Enhanced cross-border supervisory collaboration could help prevent regulatory arbitrage and avoidance. Recent efforts toward cooperation in financial regulation by the AMCM and PBC, including to coordinate work on fintech in Macao SAR, provide an opportunity for progress.

     

    Related Link: Staff Report

     

    Keywords: Asia Pacific, Macao, Banking, Article IV, Fintech, FSAP, Macro-Prudential Policy, Systemic Risk, AMCM, PBC, IMF

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    EBA Updates Lists of Entities for Use in Capital Calculations under SA

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6826