January 17, 2019

HKMA announced that it plans to issue a consultation paper on the new market risk standard in the second quarter of 2019. HKMA will also assess impact of the updated FRTB for Hong Kong, based on local data in due course. For local implementation of the market risk standard, HKMA expects to closely follow the BCBS standard. Given the size and complexity of the new market risk standard, HKMA urges all locally incorporated authorized institutions to start working on their firm-specific implementation of the market risk standard, based on the published BCBS framework, in 2019.

BCBS had issued its new minimum capital requirements for market risk (as they resulted from the fundamental review of the trading book or FRTB) on January 14, 2019. These newly issued BCBS requirements update an earlier version of the framework that was originally published in January 2016. The revised FRTB includes a set of amendments to address issues that have been identified through input from a wide spectrum of stakeholders since the publication of its original 2016 version. The revised standard on market risk takes into account extensive feedback received on a consultative document issued by BCBS in March 2018 and it is calibrated based on the most recent set of the BCBS quantitative impact study data. The revised BCBS standard comes into effect on January 01, 2022. HKMA had earlier communicated that it will align the local implementation of the new market risk standard with the latest BCBS timetable—that is, January 01, 2022.

Keywords: Asia Pacific, Hong Kong, Banking, FRTB, Market Risk, Basel III, BCBS, HKMA

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