HKMA issued a consultation on Supervisory Policy Manual module LM-1 on the regulatory framework for supervision of liquidity risk. This module provides guidance to authorized institutions on the application of the Banking (Liquidity) Rules, or BLR, and sets out the approach HKMA will take in assessing the compliance of authorized institutions with the statutory liquidity requirements.
HKMA requires each institution to maintain adequate liquidity in compliance with the minimum requirements on the statutory liquidity ratios (whichever is applicable) and to put in place sound systems and controls for the management of liquidity risk. The Banking (Liquidity) Rules under §97H(1) prescribe the requirements in respect of:
- Liquidity Coverage Ratio (LCR), which is applied to authorized institutions designated by HKMA as “category 1 institutions”
- Liquidity Maintenance Ratio (LMR), a local liquidity standard developed by HKMA for application to all other authorized institutions that are not designated as category 1 institutions and which are referred to as “category 2 institutions”
- Net Stable Funding Ratio (NSFR), which has the same scope of application as the LCR (that is, category 1 institutions)
- Core Funding Ratio (CFR), a modified version of the NSFR developed by HKMA for application to certain category 2 institutions that are designated as “category 2A institutions”
Authorized institutions are also expected to observe any other supervisory requirements specified by HKMA from time to time to enhance liquidity risk management. HKMA adopts a risk-based supervisory approach to monitor liquidity positions of authorized institutions and assess the soundness of their liquidity risk management systems and controls through a combination of supervisory actions, including (but not limited to) risk-focused off-site reviews, on-site examinations, and prudential meetings.
Keywords: Asia Pacific, Hong Kong, Banking Liquidity Risk, LCR, NSFR, Supervisory Policy Manual, Banking Liquidity Rules, HKMA
The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.
The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).
The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.
The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.
The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.
In a letter to the federally regulated financial institutions and pension plans, the Office of the Superintendent of Financial Institutions (OSFI) published a summary of the feedback received to the January 2021 discussion paper on ways to address climate risks.