HKMA updated the set of questions and answers (Q&A) on the counterparty credit risk framework under the Banking (Capital) Rules. The Q&A provide implementation guidance and are intended to assist authorized deposit-taking institutions in interpreting the Banking (Capital) Rules at a more detailed level in a number of specific areas. The set of published Q&A cover general topics, standardized approach for counterparty credit risk (SA-CCR), internal models method for counterparty credit risk, current exposure method (CEM), securities financing transactions, credit valuation adjustment (CVA) capital charge, and exposures to central counterparties.
The Q&A also cover:
- Latest frequently asked questions published by the Basel Committee on the SA-CCR and the capital requirements for bank exposures to central counterparties
- Questions raised by the industry in previous consultations on the Banking (Capital) (Amendment) Rules 2020
- Updates to reflect the passage of time and the implementation of revised or new Basel capital standards
The set of Q&A has been drafted, as far as possible, in simple non-legal language to facilitate consistent interpretation and application of the capital requirements. The answers are explanatory in nature and are intended to supplement (rather than to seek to replace) any requirements in the Banking (Capital) Rules; they are inevitably general in scope and do not take into account the particular circumstances of individual authorized institutions.
Keywords: Asia Pacific, Hong Kong, Banking, Banking Capital Rules, Counterparty Credit Risk, SA-CCR, Internal Models, CEM, CVA Risk, Credit Risk, Basel, Regulatory Capital, EBA
Previous ArticleEBA Updates Standards for Benchmarking of Internal Approaches
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.