Featured Product

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    July 29, 2021

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions. Also revised was the policy manual CS-1 that sets out the group-wide approach currently adopted by HKMA for locally incorporated authorized institutions where they form part of a financial or a commercial group, either as the head of the group, or as one of the member companies of the group. Authorized institutions are expected to review whether their remuneration systems are consistent with the principles set out in the revised module and, if needed, to adopt all necessary changes as soon as practicable, no later than January 01, 2022.

    Policy Module on Group-Wide Supervision. In Hong Kong, the structure of a group of which an authorized institution forms a part generally falls into one or more of the three categories. Type one is where an authorized institution is heading a financial group with subsidiaries engaging predominantly in providing financial services, such as banking, securities and insurance. Type two is where the authorized institutions and its subsidiaries form part of an international banking group or other supervised financial group. Type three is where an authorized institutions 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. The Policy module on group-wide supervision was revised primarily to:

    • Reflect the current supervisory approach and practices adopted by HKMA in relation to a locally incorporated authorized institution where it forms part of a banking, financial, or commercial group
    • Incorporate relevant principles in international standards concerning the supervision of financial conglomerates
    • Cater for consequential changes arising from amendments to the Banking Ordinance, relevant rules made under the Ordinance and supervisory guidelines.

    Policy Module on Remuneration. This module sets out the supervisory expectations with regard to remuneration practices of authorize institutions. This module focuses on the governance and control arrangements for, and operation of, authorized institutions’ remuneration systems in the context of the incentives for risk-taking they may create. Authorized institutions are expected to establish and operate their remuneration policies, structures, and incentive awards with due regard to the principles set out in this module. The changes incorporated in the revised policy module are mainly to:

    • Update the existing guidelines following the most recent guidance issued by the Financial Stability Board on sound remuneration practices, and in particular on the use of remuneration tools to address potential misconduct risks
    • Strengthen the Board oversight on the formulation and implementation of remuneration systems and related control processes
    • Provide guidance in relation to the adoption of group remuneration policies and approval of remuneration packages of senior management and Key Personnel for foreign bank branches
    • Update the existing guidelines to align with the remuneration disclosure requirements in the Banking (Disclosure) Rules

    Keywords: Asia Pacific, Hong Kong, Banking, Banking Ordinance, Group-Wide Supervision, Supervisory Policy Manual, CG-5, CS-1, Remuneration, Disclosures, Governance, ESG, HKMA

    Related Articles
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks

    May 20, 2022 WebPage Regulatory News
    News

    EC Publishes Results on Review of Web Accessibility Directive

    The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.

    May 19, 2022 WebPage Regulatory News
    News

    NGFS Report Explores Quantification of Climate Risk Differentials

    The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations

    May 19, 2022 WebPage Regulatory News
    News

    MAS Consults on Adjustment Spreads for Conversion of SOR Contracts

    The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.

    May 18, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8206