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    HKMA Amends Regulatory Capital Rules for Banks

    The Hong Kong Monetary Authority (HKMA) published the Banking (Capital) (Amendment) Rules 2022 (BCAR) in the Hong Kong Gazette while the Hong Kong government relaunched the subscription arrangement for its retail green bonds.

    The amendments contained in the BCAR 2022 are mainly intended to implement the Basel Committee's capital standard set out in the document titled "Capital requirements for banks’ equity investments in funds." The capital standard introduced a hierarchy of three approaches with varying degrees of risk-sensitivity for setting capital requirements for banks’ equity investments in funds. The BCAR 2022 also contains an amendment to designate the Hong Kong Export Credit Insurance Corporation as a domestic public sector entity for preferential risk-weighting treatments by locally incorporated authorized institutions. The BCAR 2022 will be tabled before the Legislative Council for negative vetting on April 27, 2022. Subject to the views of the Legislative Council, the subsidiary legislation should come into operation on July 01, 2022.

    The subscription arrangement for the government retail green bonds, for which the issuance was previously postponed due to the epidemic situation, was relaunched. The target issuance size of this retail green bond is HKD 15 billion and may further increase to up to HKD 20 billion.  The Green Bond Framework of government sets out that the proceeds of green bonds will be credited to the Capital Works Reserve Fund to finance or refinance green projects that provide environmental benefits and support the sustainable development of Hong Kong. The government will provide information on the allocation of the proceeds and expected environmental benefits of green projects on an annual basis. The bond will have a tenor of three years and bond holders will be paid interest once every six months at a rate linked to inflation in Hong Kong, subject to a minimum rate of 2.5%. The subscription period spans April 26, 2022 to May 06, 2022. The retail green bond will be issued on May 18 and listed on the Stock Exchange of Hong Kong on May 19, 2022.

     

    Effective Date: July 01, 2022

     

    Keywords: Asia Pacific, Hong Kong, Banking, BCAR, Basel, Regulatory Capital, Negative Vetting, BCBS, Securities, ESG, Sustainable Finance, Green Bonds, HKMA

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