HKMA Revises Policy Manual and Returns for Reporting of Liquidity Risk
HKMA revised the Supervisory Policy Manual module LM-1 on regulatory framework for supervision of liquidity risk. HKMA also revised two returns and related completion instructions for reporting the statutory liquidity ratio: MA(BS)1E is return on liquidity position of an authorized institution and MA(BS)26 is the return on stable funding position of an authorized institution. The revisions were intended to update the regulatory requirements consequential to the commencement of the Banking (Liquidity) (Amendment) Rules 2019 and to incorporate certain provisions to keep pace with the latest development. The returns take effect from January 01, 2020.
The key changes to LM-1 are to:
- Provide guidance for authorized institutions in recognizing Basel-compliant listed ordinary shares and triple-B rated marketable debt securities as “level 2B assets” and “liquefiable assets” under the Liquidity Coverage Ratio (LCR) and the Liquidity Maintenance Ratio (LMR) respectively
- Provide an overview of the statutory liquidity requirements in respect of the Net Stable Funding Ratio (NSFR) and the Core Funding Ratio (CFR) and explain the approach and criteria adopted by HKMA for the designation of category 2A institutions which are subject to the CFR requirements
- Streamline the guidance on the disclosure of liquidity information by authorized institutions
The main changes to the two returns for reporting the statutory liquidity ratios are to:
- Include Basel-compliant listed ordinary shares and triple-B rated marketable debt securities as “level 2B assets” and “liquefiable assets” in the calculation of LCR and LMR respectively
- Implement a required funding requirement on total derivative liabilities in the calculation of NSFR and CFR
Effective Date: January 01, 2020 (Returns)
Keywords: Asia Pacific, Hong Kong, Banking, Liquidity Risk, LCR, NSFR, Supervisory Policy Manual, Statutory Liquidity Ratio, MA(BS)26, MA(BS)1E, Reporting, Banking Liquidity Rules, HKMA
Featured Experts

Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Next Article
ECB Publishes Release 5.0 of BIRD DatabaseRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.