HKMA Announces Finalization of Banking Liquidity Amendment Rules 2019
HKMA issued a letter informing all authorized institutions that negative vetting of the Banking (Liquidity) (Amendment) Rules 2019 (BLAR) has now expired. Thus, the BLAR will now come into operation from January 01, 2020. The main changes to the Banking (Liquidity) Rules are to recognize Basel-compliant listed ordinary shares and triple-B rated marketable debt securities as “level 2B assets” and “liquefiable assets” under the Liquidity Coverage Ratio (LCR) and the Liquidity Maintenance Ratio, respectively. The changes to BLAR also implement a funding requirement on total derivative liabilities under the Net Stable Funding Ratio (NSFR) and the Core Funding Ratio.
The BLAR amends the Banking (Liquidity) Rules. The key changes relate to recognition of the Basel-compliant listed ordinary shares and certain marketable debt securities issued by corporates, sovereigns, central banks, or public-sector entities as level 2B assets in calculating LCR of a category 1 institution ratio and as liquefiable assets in calculating the Liquidity Maintenance Ratio of a category 2 institution. The amendments also relate to the implementation of a required stable funding factor of 5% on total derivative liabilities (before adjustments) in calculating NSFR of a category 1 institution and a required core funding factor of 5% on total derivative liabilities (before adjustments) in calculating the core funding ratio of a category 2A institution. The BLAR 2019 also makes amendments to LCR provisions in the Banking (Liquidity) Rules to reflect the latest BCBS guidance on the eligibility of level 2B assets.
Effective Date: January 01, 2020
Keywords: Asia Pacific, Hong Kong, Banking, BLAR, Basel III, LCR, NSFR, Liquidity Risk, Liquidity Maintenance Ratio, HKMA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Related Articles
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
ECB to Consider Climate Risks When Reviewing Collateral Framework
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
ACPR Publishes Corrective Version of RUBA Taxonomy
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
