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
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