HKMA Concludes Consultation on Loss Absorbing Capacity Requirements
HKMA released the consultation conclusion on the public consultation related to rules prescribing loss-absorbing capacity (LAC) requirements for authorized institutions. The rules were proposed to be made as subsidiary legislation under section 19(1) of the Financial Institutions (Resolution) Ordinance (Cap. 628).
The core of the HKMA’s LAC policy proposal is that authorized institutions whose failure could pose a risk to the financial system in Hong Kong should be required to have sufficient LAC to facilitate the orderly failure of such entities, should they reach the point of non-viability. To this end, requiring authorized institutions to maintain sufficient LAC is a pre-requisite to enabling the Monetary Authority, as resolution authority for the banking sector, to use the powers under the resolution regime established by the Ordinance to manage any future failure of an authorized institution in an orderly manner that avoids disruption to financial stability and minimizes the risk to public funds.
At the end of the consultation period (January 17, 2018 to March 16, 2018), 10 submissions had been received, including from industry associations (both domestic and international), authorized institutions, and financial market infrastructures. Respondents provided constructive comments on the proposals set out in the consultation paper. While some sought additional clarity on the details of the proposals, no respondents challenged the basic principle of the policy proposal. HKMA has carefully reviewed all comments and its responses are set out in the consultation conclusion, with appropriate changes adopted in developing the draft rules. The intention is to consult industry on the text of the draft rules before introducing the rules as subsidiary legislation under the Ordinance into the Legislative Council for negative vetting later in 2018. The Ordinance was enacted by the Legislative Council on June 22, 2016. The main provisions of the Ordinance came into operation on July 07, 2017.
Keywords: Asia Pacific, Hong Kong, Banking, Loss Absorbing Capacity, Resolution Regime, Consultation Conclusions, HKMA
Previous Article
Central Bank of Ireland Increases CCyB Rate on Irish ExposuresRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards