HKMA announced its plans to defer the implementation of final Basel III package, inline with the timeline announced by the Group of Central Bank Governors and Heads of Supervision (GHOS). On March 27, 2020, BCBS had announced the deferral of the implementation date of the final Basel III standards by one year, to January 01, 2023. BCBS had announced this deferral as part of the ongoing effort by supervisors worldwide to address challenges to the financial system that have been brought about by COVID-19.
The target implementation of the revised frameworks on credit risk, operational risk, output floor, and leverage ratio, along with their associated disclosure requirements, is being deferred by one year, to January 01, 2023. The locally incorporated authorized institutions will be required to implement the new market risk framework for reporting purposes by January 01, 2023. The local implementation of the actual capital requirements based on the new framework will be no earlier than January 01, 2023. Its timing will take into account the implementation progress observed in major jurisdictions. The local implementation of revised credit valuation adjustment (CVA) framework will be aligned with the revised market risk framework and follow the timelines used there both for reporting and the implementation of the CVA capital requirements.
The supervisory initiatives are in line with the aims of recent actions taken by HKMA to ameliorate the impact of COVID-19 on Hong Kong’s economy and on the local banking sector. For instance, HKMA encouraged authorized institutions to introduce measures to help tide their customers over this difficult time through forums such as the Banking Sector SME Lending Coordination Mechanism and has provided guidance on the supervisory treatment of these relief measures to ensure that they are rolled out expeditiously. HKMA is also considering the implications of COVID-19 for the authorized institutions' application of the expected credit loss provisioning.
Keywords: Asia Pacific, Hong Kong, Banking, Basel III, GHOS, Market Risk, COVID 19, CVA, Credit Risk, Operational Risk, HKMA
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