Featured Product

    HKMA Report Assesses Financial Stability of Banking Sector

    September 29, 2021

    The Hong Kong Monetary Authority (HKMA) published the semi-annual monetary and financial stability report for September 2021. The report highlights that climate change is one of the major emerging risks to financial stability. Based on a sample of syndicated loans in Asia Pacific, the report finds that banks in the region have started to price-in climate transition risk for loans to emission-intensive sectors since the Paris Agreement, suggesting that banks have begun to incorporate climate risk considerations in their existing risk management framework. Nevertheless, banks should keep abreast of the latest developments on climate risk management practices when considering their own risk management approach. In this regard, HKMA has actively engaged with banking industry to facilitate authorized institutions’ inclusion of climate risk management practices in their operations.

    Among other issues, the report examines the recent performance of banking sector. Despite visible economic recovery in the first half of 2021, retail banks registered thinner profits. Notwithstanding the fall in profits, the Hong Kong banking sector remained robust and resilient. In particular, the asset quality of the banking sector was stable in the first half of 2021, with classified loan ratios staying low by both historical and international standards. Capital and liquidity positions of the banking sector also remained robust, providing strong buffers for banks to withstand shocks. Regarding the liquidity positions, the average liquidity coverage ratio (LCR) of category 1 institutions and the average liquidity maintenance ratio of category 2 institutions also maintained at high levels of 154.0% and 58.1% respectively in the second quarter of 2021. In addition, the latest ratios under the net stable funding ratio requirement stayed at levels well exceeding their statutory minimum requirements.

    Looking ahead, the pace and strength of economic recovery remain uncertain as it will hinge on how the pandemic unfolds further. This, together with uncertainties over the future pace and direction of monetary policy in the major economies, will continue to pose challenges to the banking sector in Hong Kong. In view of rising indebtedness in the household and corporate sectors, banks should remain vigilant and carefully assess the potential effects of these risk factors on the asset quality of their loan portfolios. As part of its Quarterly Bulletin, HKMA also published a feature article that reviews the journey of Bond Connect and looks ahead to future developments of the scheme. Bond Connect is a mutual market access scheme that allows investors in Mainland China and overseas to trade, settle, and hold bonds tradable in the Mainland and Hong Kong bond markets through a linkage between the Mainland and Hong Kong financial infrastructure institutions.

     

    Keywords: Asia Pacific, Hong Kong, Banking, ESG, Climate Change Risk, Transition Risk, Basel, Regulatory Capital, Liquidity Risk, Credit Risk, Bond Connect, Financial Stability, HKMA

    Featured Experts
    Related Articles
    News

    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.

    June 21, 2022 WebPage Regulatory News
    News

    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).

    June 21, 2022 WebPage Regulatory News
    News

    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.

    June 21, 2022 WebPage Regulatory News
    News

    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.

    June 21, 2022 WebPage Regulatory News
    News

    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.

    June 17, 2022 WebPage Regulatory News
    News

    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.

    June 17, 2022 WebPage Regulatory News
    News

    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)

    June 16, 2022 WebPage Regulatory News
    News

    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.

    June 16, 2022 WebPage Regulatory News
    News

    BIS Bulletins Discuss DeFi Lending and Aspects of Crypto-Assets

    The Bank for International Settlements (BIS) published bulletins on lending in decentralized finance (DeFi) system, on blockchain scalability and fragmentation of crypto, and on extractable value and market manipulation in crypto and decentralized finance.

    June 16, 2022 WebPage Regulatory News
    News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8292