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November 16, 2018

HKMA announced that the Banking Exposure Limits Rules (BELR), the Banking Capital Amendment Rules 2018 (BCAR), and the Banking Disclosure Amendment) (No. 2) Rules 2018 (BDAR) have been gazetted. These gazetted rules implement the recent international standards on banking regulation in Hong Kong. The three pieces of subsidiary legislation will be tabled before the Legislative Council for negative vetting on November 21, 2018. Subject to the views of the Legislative Council, the subsidiary legislation should come into operation.

BELR. The BELR replaces the existing Banking Exposure Limits Rules (containing an equity exposure limit) and other exposure limits in Part XV of the Banking Ordinance. The BELR implements the 2014 Basel standards on Supervisory framework for measuring and controlling large exposures.

BCAR. The amendments in the BCAR mainly incorporate, into the Banking Capital Rules, the 2016 Basel standard on total loss-absorbing capacity (TLAC) holdings, a capital treatment to address concentration risk in sovereign exposures supplementary to the implementation of the BELR, and the “internal assessment approach” of the 2014 Basel III Document on revisions to the securitization framework; the revisions to the securitization framework, which is a methodology for calculating capital requirement designed for certain securitization exposures in asset-backed commercial paper programs. HKMA also specified the HKMC Insurance Limited and the HKMC Annuity Limited as domestic public-sector entities for preferential capital treatment under the Banking Capital Rules to cater for the business restructuring of the Hong Kong Mortgage Corporation Limited and to introduce certain miscellaneous amendments to enhance the consistency and clarity of certain provisions in the Banking Capital Rules.

BDAR. The Disclosure rules contain a minor consequential adjustment to the definition of “capital requirements” to align with the capital treatment to address concentration risk in sovereign exposures (as referred to in BCAR).

The amendments in the BCAR other than those in relation to TLAC holdings and concentration risk in sovereign exposures come into operation on January 11, 2019. April 01, 2019  is the effective date for amendments in the BCAR in relation to TLAC holdings while July 01, 2019 is the effective date for the BELR, the BDAR, and amendments in the BCAR in relation to concentration risk in sovereign exposures.

Effective Date: January 11, 2019/April 01, 2019/July 01, 2019

Keywords: Asia Pacific, Hong Kong, Banking, Banking Ordinance, Large Exposures, Disclosures, TLAC, ABCP Securitization, Hong Kong Government, HKMA

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