Featured Product

    HKMA Clarifies Regulatory Treatment of Measures to Ease COVID Impact

    May 25, 2020

    HKMA published a circular, addressed to authorized institutions, on the application of the Basel Committee guidance on certain COVID-related measures. The Basel Committee issued its guidance on March 27, 2020 and April 03, 2020 with the aim to alleviate the impact of COVID-19 on the global banking system. The related Basel Committee guidance and this HKMA circular provide clarifications regarding the regulatory capital treatment of loan guarantee measures, the provisioning of expected credit losses (ECLs) under HKFRS/IFRS 9, and the timeline for implementing margin requirements for non-centrally cleared OTC derivatives.

    To ensure that authorized institutions reflect the risk-reducing effect of the extraordinary support measures related to COVID when calculating their regulatory capital requirements, HKMA has published several technical clarifications, which are enclosed as an Annex to this circular. These clarifications address the reporting requirements as well as the capital treatment of the associated loans under the standardized credit risk approach and the internal ratings-based approach. In this circular, HKMA also announced that it will defer the final two implementation phases of margin requirements for non-centrally cleared OTC derivatives by an additional year. With this extension, the final implementation phase will start on September 01, 2022, at which point the covered entities with an average aggregate notional amount (AANA) of non-centrally cleared OTC derivatives greater than HKD 60 billion will be subject to the requirements. As an intermediate step, from September 01, 2021, covered entities with an AANA of non-centrally cleared OTC derivatives greater than HKD 375 billion will be subject to the requirements.

    With respect to the ECL provisioning, HKMA expects institutions to continue to apply the relevant ECL frameworks for accounting purposes. HKMA expects ECL estimates to reflect the mitigating effect of the significant economic support and payment relief measures put in place by public authorities and the banking sector. The provision of relief measures to borrowers should not automatically result in exposures moving from a 12-month ECL to a lifetime ECL measurement. Additionally, institutions are expected to exercise informed judgment and to use the flexibility inherent in HKFRS/IFRS 9, for example, to give due consideration to long-term economic trends in estimating ECL. Finally, HKMA highlighted that it will continue to monitor the banking and supervisory implications of COVID-19 outbreak and coordinate with the BCBS and other relevant standard-setting bodies on responses to the pandemic.

    Keywords: Asia Pacific, Hong Kong, Banking, COVID-19, Margin Requirements, OTC Derivatives, IFRS 9, HKFRS 9, Basel, Loan Guarantee, Loan Moratorium, Credit Risk, Regulatory Capital, HKMA

    Featured Experts
    Related Articles

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News

    DNB Publishes Multiple Reporting Updates for Banks

    DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.

    February 28, 2023 WebPage Regulatory News

    NBB Sets Out Climate Risk Expectations, Issues Reporting Updates

    The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting

    February 24, 2023 WebPage Regulatory News

    EBA Updates Address Securitization Standards and DGS Guidelines

    The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.

    February 21, 2023 WebPage Regulatory News

    FSB Publishes Letter to G20, Sets Out Work Priorities for 2023

    The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793