Featured Product

    IMF Publishes Reports on 2018 Article IV Consultation with Hong Kong

    January 24, 2019

    IMF published its staff report and selected issues report under the 2018 Article IV consultation with the People's Republic of China-Hong Kong Special Administrative Region (SAR). The staff report focuses on progress made toward implementing the 2014 Financial Sector Assessment Program (FSAP) recommendations and assesses the overall the health of the financial sector in Hong Kong SAR, including the implementation of Basel III. The selected issues report highlights Hong Kong SAR as a regional financial center and a gateway to Mainland China, examining the impact of external developments on the financial sector of Hong Kong SAR.

    The staff report highlights that robust financial regulation and supervision should help weather domestic and external shocks. The implementation of Basel III requirements remains on track and the countercyclical capital buffer has appropriately been increased further. The authorities have also introduced the net stable funding ratio while rules on loss-absorbing capacity requirements for authorized institutions will be implemented by the year-end. Banks’ capital buffers and liquidity positions remain strong, due to stringent regulatory standards. Moreover, supervision of bank loans to property developers has been appropriately strengthened through higher capital charges, with Mainland China-related exposures being closely monitored. The overall financial exposure to Mainland China remains high, with about 39% of loans extended for Mainland-related purposes. Asset quality of that lending remained sound, with a nonperforming loan ratio of 0.64% in the third quarter of 2018. Appendix V summarizes the property market measures introduced since 2009 while the staff recommends that the authorities should also consider measures to extend the regulatory perimeter to reduce regulatory arbitrage from lending by property developers.

    The staff report states that Securities and Futures Commission (SFC) intends to impose quantitative limits on margin lending by brokers. Moreover, the development of a risk-based capital regime for insurance companies is in Phase 2, with a focus on detailed rules for quantitative requirements. The staff report also concludes that the authorities have implemented all the main recommendations from the 2014 FSAP. Appendix IV details the 2014 FSAP recommendations and their implementation status while Appendix VI discusses the stats of the key recommendations of the 2017 Article IV consultation. The next FSAP for Hong Kong SAR is scheduled for 2019. The staff recommends that robust regulatory and supervisory framework should continue to be strengthened to limit buildup of risks.

    The staff also recommends that fintech developments should be carefully evaluated to balance efficiency gains against potential risks. Continued efforts to support healthy development of the fintech sector will be the key to bolster standing of Hong Kong SAR as a regional financial center. Technology risks and cyber-security continue to be a focus, with the aim to achieve a balance between innovation and regulation. In this context, a number of initiatives are currently underway:

    • HKMA launched an Open Application Programming Interface (API) Framework for the banking sector in July 2018 to encourage greater banking sector competition and innovation; all retail banks will be required to have open API at the end of the implementation, which will take place over four phases.
    • The revised Guideline on Authorization of Virtual Banks was issued in May 2018.
    • The Faster Payment System, allowing the use of e-mails and mobile phones for payments in Hong Kong dollars and RMB across 21 banks and ten e-wallets, was launched in September 2018 and it supports instant, multi-currency payments on a 24/7 basis.
    • HKMA is strengthening collaboration with authorities in other jurisdictions to support innovation and information-sharing. A distributed ledger technology-based trade finance platform—eTradeConnect—was launched in October 2018. Meanwhile, the Enhanced Fintech Supervisory Sandbox, in operation since September 2017, helps to enhance communications between regulators and financial institutions on ongoing Fintech projects.

     

    Related Links

    Keywords: Asia Pacific, Hong Kong, Banking, Insurance, Securities, Basel III, Fintech, Article IV, FSAP, IMF

    Featured Experts
    Related Articles
    News

    ECB Finds Banks Unprepared for Pillar 3 Climate Risk Disclosures

    The European Central Bank (ECB) published results of the 2022 supervisory assessment of climate-related and environmental risk disclosures among significant institutions (103) and a selected number of less significant institutions (28).

    April 21, 2023 WebPage Regulatory News
    News

    NCUA Assesses Credit Union Exposure to Climate-Related Physical Risks

    The National Credit Union Administration (NCUA) released a Research Note that examines the exposure of credit unions to climate-related physical risks. In a related development

    April 21, 2023 WebPage Regulatory News
    News

    EBA Issues Multiple Regulatory and Reporting Updates for Banks

    The European Banking Authority (EBA) is seeking comments, until July 31, 2023, on the draft Guidelines on the proposed common approach to the resubmission of historical data under the EBA reporting framework.

    April 21, 2023 WebPage Regulatory News
    News

    EC Adopts Regulation on Own Funds, Issues Other Updates

    The European Commission adopted Delegated Regulations on own funds and eligible liabilities, on requirements for the internal methodology under the internal default risk model

    April 20, 2023 WebPage Regulatory News
    News

    CDP Platform to Report Plastic-Related Impact, Issues Other Updates

    The Carbon Disclosure Project (CDP) announced that its global environmental disclosure platform has enabled reporting on plastic-related impact for nearly 7,000 companies worldwide

    April 19, 2023 WebPage Regulatory News
    News

    IASB to Enhance Reporting of Climate Risks, Proposes IFRS 9 Amendments

    The International Accounting Standards Board (IASB) updated its work plan to enhance the reporting of climate-related risks in the financial statements,

    April 19, 2023 WebPage Regulatory News
    News

    BIS Addresses Data Gaps and Macro-Prudential Policy for Climate Risks

    The Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) published a brief paper that examines challenges associated with the use of macro-prudential policies to address climate-related financial risks.

    April 17, 2023 WebPage Regulatory News
    News

    FCA Sets Out Business Plan, Launches TechSprint on Greenwashing

    The Financial Conduct Authority (FCA) published its business plan for 2023-24. The plan sets out details of the work planned for the next 12 months to achieve better outcomes for consumers and markets

    April 17, 2023 WebPage Regulatory News
    News

    UK Committee Sets Out Recommendations for Next Phase of Open Banking

    The Joint Regulatory Oversight Committee (JROC), comprising the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) as co-chairs and the HM Treasury and the Competition and Markets Authority (CMA) as members

    April 17, 2023 WebPage Regulatory News
    News

    ECB Publishes Multiple Regulatory Updates for Banking Institutions

    The European Central Bank (ECB) published the results of the 2022 climate risk stress test of the Eurosystem balance sheet,

    April 17, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8873