HKMA Consults on Supervisory Policy for Systemically Important Banks
HKMA proposed amendments to the Supervisory Policy Manual, or SPM, module CA-B-2 on systemically important banks. The module sets out the assessment methodology of HKMA for identifying systemically important authorized institutions in Hong Kong and for calibrating the level of any higher loss absorbency capital requirements. The module also sets out other policy and supervisory measures to be applied to authorized institutions identified as being systemically important to address the risks they pose. The proposed amendments mainly aim to improve the assessment of authorized institutions’ complexity in the domestic systemically important bank (D-SIB) identification process and to update various sections of the Policy Manual to reflect recent developments. The comment period for revisions expires on December 10, 2020 and HKMA plans to finalize the amendments by December 2020.
Notional amounts of over-the-counter (OTC) derivatives have been used in assessing complexity of banks in the global systemically important bank (G-SIB) framework and many D-SIB frameworks in other jurisdictions. As all authorized institutions have been required to report all their OTC derivatives transactions to the trade repository of HKMA since July 2017, the outstanding notional amounts of OTC derivatives of individual authorized institutions are now available to HKMA. HKMA is, therefore, proposing to replace the current qualitative assessment of the complexity factor in the D-SIB framework in Hong Kong with this measure, using a 10% weight in the quantitative assessment of the framework and to reduce the weight of the size factor from 50% to 40% correspondingly. HKMA also proposed to update various sections of Module CA-B-2 to reflect the following:
- Completion of the phase-in of higher loss absorbency requirements under the D-SIB framework in Hong Kong in early 2019
- Reference to the general guidance for the application of the “Principles for effective risk data aggregation and risk reporting,” incorporated into Supervisory Policy Manual Module IC-1 on risk management framework in 2017, and the expectation of HKMA on the D-SIB compliance with these principles
- Statutory recovery planning requirements as prescribed in the Banking Ordinance that came into operation in February 2018 and the subsequent revision to the Supervisory Policy Manual module RE-1 on recovery planning in June 2020
- Code of Practice chapter RA-2 under the Financial Institutions (Resolution) Ordinance on the approach of HKMA to resolution planning issued in July 2017
- Intention to take recovery plans and resolvability of authorized institutions into consideration qualitatively in D-SIB assessment
- Revision of G-SIB framework in 2018 announced by BCBS
Comment Due Date: December 10, 2020
Keywords: Asia Pacific, Hong Kong, Banking, Regulatory Capital, D-SIB, G-SIB, Supervisory Policy Manual, Systematically Important Bank, OTC Derivatives, Banking Ordinance, 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.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
FSB Consults on Forward-Looking Climate Metrics for Financial SectorRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
HKMA Announces Launch of Data Repository on Sustainable Finance
The Hong Kong Monetary Authority (HKMA) announced that the Green and Sustainable Finance (GSF) Cross-Agency Steering Group has launched the information and data repositories and outlined the progress made in advancing the development of green and sustainable finance in Hong Kong.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
NGFS Report on Integration of G-Cubed Model into NGFS Scenarios
The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.