Featured Product

    HKMA Criteria on Accepting Life Insurance Policy as Security in BELR

    January 21, 2020

    HKMA issued a circular on life insurance policy as acceptable security under the Banking (Exposure Limits) Rules (BELR) Rule 29(2). HKMA received a number of enquiries on whether life insurance policy is an acceptable security for the purposes of Part 5 of the BELR on financial facility provided to employee. To strike a balance between prudential regulation and allow room for authorized institutions to design their own staff loan policies, HKMA, therefore, considered that life insurance policy should only be accepted as security for financial facility to employee if certain criteria are met. The Annex to this circular contains the criteria for life insurance policy to be accepted as security under the BELR.

    HKMA also acknowledged the need of special arrangements to avoid this policy, creating hardship on the employees who have existing financial facilities secured by life insurance policy. Pursuant to the BELR rule 29(2), life insurance policy is acceptable to a prudent banker

    • without condition for the financial facilities already granted or provisionally granted to an employee on or before the date of this circular—which are term facilities or which are revolving facilities until the date the facilities are due for annual credit review for the first time after December 31, 2020
    • only if the criteria in the Annex are met for all the financial facilities granted after the date of this circular or existing revolving financial facilities from the date that the facilities are due for annual credit review for the first time after December 31, 2020.

    A life insurance policy is acceptable to a prudent banker if the following criteria are met:

    • The life insurance policy is written in or from Hong Kong by an authorized insurer in Hong Kong
    • The insurer or its holding company has a credit rating of at least BBB- from Standard & Poor’s Ratings or Fitch Ratings, or an equivalent rating from other credit agencies at the time the life insurance policy is accepted by the authorized insurer as security
    • The value of the life insurance policy as security is measured at the lower of the surrender value or 75% of the cash value of the life insurance policy, or a more prudent internal valuation.

    HKMA intends to amend paragraph 4 of the Banking (Exposure Limits) Code to include life insurance policy (with conditions) as a security that is “acceptable to a prudent banker,” when the next opportunity arises. 

     

    Keywords: Asia Pacific, Hong Kong, Banking, Insurance, BELR, Life Insurance Policy, Exposure Limits, Concentration Risk, Banking Exposure Limits Rule, HKMA

    Related Articles
    News

    UK Authorities Consult on Implementation of Basel 3.1 Standards

    The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.

    November 30, 2022 WebPage Regulatory News
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News
    News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8597