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    HKMA Proposes Revisions to Group-Wide Approach to Supervision of Banks

    December 01, 2020

    HKMA proposed revisions to the Supervisory Policy Manual module CS-1 on group-wide approach to supervision of locally incorporated authorized institutions. The policy module describes the group-wide approach of HKMA for the supervision of authorized institutions where they form part of a financial or a commercial group, either as the head of the group (in case of a financial group) or as one of the member companies of the group (in case of a financial or a commercial group). The consultation will run until February 01, 2021.

    In line with the Core Principles for Effective Banking Supervision, when HKMA supervises an authorized institution, it considers the consolidated risks of that authorized institution's banking group (typically, its immediate holding company, offices, subsidiaries, affiliates, and joint ventures, both domestic and foreign). When the banking group of an authorized institution is part of a wider group, with other group companies (both financial and non-financial) ultimately headed by a common holding company, the risks that could be posed to the authorized institutions by these group companies are also considered. In Hong Kong, the structure of a group of which an authorized institution forms a part generally falls into one or more of the following three categories where an authorized institution

    • is heading a financial group with subsidiaries engaging predominately in providing financial services, such as banking, securities, and insurance.
    • and its subsidiaries form part of an international banking group or other supervised financial group (one that is headed by a bank or a regulated holding company in an overseas jurisdiction, including through one or more intermediate holding companies above the authorized institution).
    • and its subsidiaries are part of a group that is headed by an unregulated holding company, which controls entities engaging in financial activities or a wider range of financial and non-financial activities. This covers groups whose main lines of business are non-financial in nature. Where this is the case, HKMA will generally require the authorized institution within the group to be headed immediately by a locally incorporated holding company, to ensure that the banking (and related) activities of the holding company are subject to relevant prudential standards. 

     

    Comment Due Date: February 01, 2021

    Keywords: Asia Pacific, Hong Kong, Banking, Supervisory Policy Manual, Banking Supervision, SPM CS-1, Group-Wide Supervision, HKMA

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