Featured Product

    HKMA Updates Policy Module for Non-Centrally Cleared OTC Derivatives

    September 11, 2020

    HKMA revised the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions. HKMA issued the revised module CR-G-14 as a statutory guideline under section 7(3) of the Banking Ordinance. The module sets out minimum standards that HKMA expects authorized institutions to adopt in relation to margin and other risk-mitigation techniques for non-centrally cleared OTC derivatives transactions. HKMA had consulted on revisions to the module from May 25 to June 25, 2020.

    Authorized institutions that are in scope for the margin requirements and risk mitigation standards but have not applied the provisions set out in the revised paragraphs of the module should comply with these requirements from September 01, 2021. Early adoption is also allowed. In the revised module, HKMA:

    • Revises the phase-in schedule of initial margin requirements, according to the announcement made by BCBS and IOSCO in April 2020
    • Defers the remaining implementation phases of the risk-mitigation standards to align with the updated initial margin implementation phase-in schedule
    • Extends the exemption of non-centrally cleared single-stock options, equity basket options, and equity index options from the margin requirements
    • Provides clarification on the documentation, reporting, and notification requirements for authorized institutions adopting substituted compliance
    • Updates the list of member jurisdictions, of BCBS-IOSCO Working Group on margin requirements, deemed comparable under the margin requirements and risk mitigation standards of HKMA
    • Clarifies that genuine amendments made to existing derivatives contracts to give effect to benchmark reforms will not be considered as new contracts subject to the margin requirements
    • Introduces new guidance on authorized institutions’ derivatives transactions with leasing entities that are part of manufacturing groups
    • Updates the guidance in relation to valuation with counterparties, portfolio reconciliation, dispute resolution, monitoring of model performance, and collateral eligibility

    Keywords: Asia Pacific, Hong Kong, Banking, Securities, Supervisory Policy Manual, OTC Derivatives, Counterparty Credit Risk, Initial Margin, Banking Ordinance, Basel, BCBS, IOSCO, HKMA

    Featured Experts
    Related Articles

    APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness

    APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).

    December 02, 2021 WebPage Regulatory News

    EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance

    The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).

    December 01, 2021 WebPage Regulatory News

    FSB Sets Out Good Practices for Crisis Management Groups

    The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.

    November 30, 2021 WebPage Regulatory News

    APRA Penalizes Heritage Bank for Incorrect Reporting of Capital

    The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.

    November 29, 2021 WebPage Regulatory News

    OSFI Releases Annual Report 2021-2022

    The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.

    November 29, 2021 WebPage Regulatory News

    OSFI Updates Timeline for Implementation of Certain Basel Rules

    Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.

    November 29, 2021 WebPage Regulatory News

    EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR

    EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.

    November 29, 2021 WebPage Regulatory News

    FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR

    The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.

    November 29, 2021 WebPage Regulatory News

    APRA Finalizes Capital Adequacy Standards for Banks

    The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.

    November 29, 2021 WebPage Regulatory News

    CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.

    November 29, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7751