HKMA Keeps Countercyclical Capital Buffer for Banks Unchanged
HKMA announced that the countercyclical capital buffer (CCyB) ratio for banks in Hong Kong remains unchanged at 1.0%. While making this decision, HKMA considered a series of quantitative indicators and qualitative information, including an “indicative buffer guide.” The latest indicative buffer guide, which has been calculated based on data from the second quarter of 2020, signals a CCyB of 2.5%. However, the projection based on all available data suggests that the indicative buffer guide would very likely signal a lower CCyB than this when all relevant data from the third quarter of 2020 will be available. Mr. Eddie Yue of HKMA stated that it is appropriate to keep the CCyB ratio unchanged at this time, as the economic environment in Hong Kong is still uncertain.
In Hong Kong, the CCyB ratio is usually reviewed on a quarterly basis. CCyB is an integral part of the Basel III regulatory capital framework and is being implemented in parallel by Basel Committee member jurisdictions worldwide. The power to implement the CCyB in Hong Kong is provided by the Banking (Capital) Rules, which enable HKMA to announce a CCyB ratio for Hong Kong. The specific CCyB requirement applicable to a given authorized institution is expressed as a percentage of its common equity tier 1 capital to its total risk-weighted assets. The CCyB requirement of each authorized institution may vary, depending on the geographic mix of its private-sector credit exposures and the CCyB applicable in each jurisdiction where it has such exposures.
Keywords: Asia Pacific, Hong Kong, Banking, CCyB, Basel, Regulatory Capital, Macro-Prudential Policy, BCR, HKMA
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