Hong Kong Government Publishes Loss Absorbing Capacity Rules for Banks
The Government of the Hong Kong Special Administrative Region published, in the Gazette, the Financial Institutions (Resolution) (Loss-Absorbing Capacity Requirements – Banking Sector) Rules (the Rules) and the Inland Revenue (Amendment) (No. 6) Bill 2018. The Rules and the Amendment Bill will be tabled before the Legislative Council at the sittings on October 24 and October 31, 2018, respectively. The Rules will come into operation on December 14, 2018, on negative vetting by the Legislative Council.
Following the commencement of the Financial Institutions (Resolution) Ordinance (Cap. 628) (the Ordinance) in July 2017, the Monetary Authority, as the resolution authority for authorized institutions, has made the Rules pursuant to section 19(1) of the Ordinance to prescribe minimum loss-absorbing capacity (LAC) requirements for authorized institutions and their group companies. The Rules are closely aligned to the international standards on LAC requirements, as set out in the Total Loss-absorbing Capacity Term Sheet of FSB.
Owing to the loss-absorbing nature of the LAC debt instruments, their profits tax treatment under the Inland Revenue Ordinance (Cap. 112) is uncertain, in particular whether they are eligible for debt-like tax treatment. To facilitate the implementation of the Rules, the Amendment Bill will provide certainty of tax treatment for LAC debt instruments issued by authorized institutions and relevant group companies. HKMA conducted a public consultation at the beginning of 2018 on the approach to implementing LAC requirements in Hong Kong, along with a subsequent industry consultation on the draft text of the Rules and the Amendment Bill. Respondents were broadly supportive of the proposals and their views have been suitably reflected in the Rules and the Amendment Bill.
Effective Date: December 14, 2018
Keywords: Asia Pacific, Hong Kong, Banking, TLAC, Loss Absorbing Capacity, Resolution, Hong Kong Government, HKMA
Previous Article
PRA Issues SS4/18 on Financial Management and Planning by InsurersRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
