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    HKMA Revises Regulatory Framework for Supervision of Liquidity Risk

    August 28, 2020

    HKMA issued the revised version (Version 3) of the Supervisory Policy Manual module LM-1 on the regulatory framework for supervision of liquidity risk, as a statutory guideline under the Banking Ordinance. The revised module incorporates regulatory requirements consequential to the commencement of the Banking (Liquidity) (Amendment) Rules 2019 and reflects latest developments in the Basel III liquidity standards.

    The revised policy module is a statutory guideline on the regulatory framework adopted by HKMA for supervising liquidity risk at authorized institutions. It offers guidelines with respect to liquidity-related disclosures and sets out the approach of HKMA in assessing authorized institutions’ compliance with the statutory liquidity requirements, including the liquidity coverage ratio (LCR), the liquidity maintenance ratio, the net stable funding ratio (NSFR), and the core funding ratio. In its risk-based supervision, HKMA conducts offsite analysis of the liquidity positions of an authorized institution. The information required for analysis is primarily obtained through regular submissions of these returns:

    • Return on Liquidity Position of an Authorized Institution (MA(BS)1E)
    • Return on Stable Funding Position of an Authorized Institution (MA(BS)26)
    • Return on Intraday Liquidity Position of an Authorized Institution (MA(BS)22)
    • Return on Liquidity Monitoring Tools (MA(BS)23)
    • Return on Selected Data for Liquidity Stress-Testing (MA(BS)18)

    This revised module should be read in conjunction with the the Banking (Liquidity) Rules, the Code of Practice under §97M of the Banking Ordinance, the Completion Instructions for Returns MA(BS)1E and MA(BS)26, LM-2, and other relevant supervisory documents that may be issued by HKMA.


    Keywords: Asia Pacific, Hong Kong, Banking, Liquidity Risk, LCR, NSFR, Supervisory Policy Manual, Banking Liquidity Rules, Reporting, Disclosures, Basel, HKMA

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