HKMA Consults on Implementation of Final Basel III Reform Package
HKMA is consulting on the approach to implementing the Basel III final reform package in respect of standards included in the package, with certain exceptions. The standards in relation to the revised market risk framework and the revised credit valuation assessment (CVA) framework, along with standards such as the disclosure requirements associated with the package, have been, or will be, the subjects of separate consultations. The consultation sets out the proposed work plan (with timeline) for implementing the Basel III final reform package in Hong Kong. The policy proposals in this consultation paper consider the outcome of a quantitative impact study on selected locally incorporated authorized institutions. This consultation will close on January 06, 2021, with HKMA proposing to bring into force the new requirements in this consultation on January 01, 2023, in line with the internationally agreed timetable.
The consultation paper sets out the overall results of the local quantitative impact study and covers policy proposals for the following standards included in the Basel III final reform package:
- Revised standardized approach for credit risk and revised internal ratings-based approach for credit risk
- Revised basic approach for credit risk (retained from the current framework, incorporating certain modifications to align with the revised standardized approach for credit risk)
- Revised operational risk framework
- Output floor
- Revisions to the leverage ratio standard
When finalized, the revised requirements proposed in this consultation paper will be implemented through legislative amendments to the Banking (Capital) Rules, together with corresponding updates to the relevant supervisory guidance and the Return of capital adequacy ratio (MA(BS)3)—that is, the CAR return. Meanwhile, to the extent that the text in the Basel III final reform package, along with the proposals contained in this consultation paper, already provides sufficient information on the key fabrics of the requirements contained in the package, authorized institutions are encouraged to start gearing up their information technology systems to prepare for the implementation of the requirements. Post this consultation, in the first half of 2021, HKMA expects to launch an informal consultation of detailed proposals to amend the Banking (Capital) Rules, followed by a statutory consultation of Banking (Capital) (Amendment) Rules in the second half of 2022. Finally, in the fourth quarter of 2022, HKMA expects to table Banking (Capital) (Amendment) Rules to the Legislative Council for negative vetting, with the target implementation date in 2023.
Comment Due Date: January 06, 2021
Keywords: Asia Pacific, Hong Kong, Banking, Basel, Basel IV, Regulatory Capital, Credit Risk, Operational Risk, Leverage Ratio, Output Floor, Standardized Approach, IRB Approach, HKMA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
ESMA Updates Q&A on Benchmarks Regulation in EURelated Articles
APRA Publishes Results of Climate Risk Self-Assessment Survey
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
ACPR Publishes Updates Related to CRD IV and Covered Bonds
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
BIS Paper Contributes to Debate on Regulating NBFIs and Big Techs
The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.
EIOPA Publishes Guidance on Climate Change Scenarios in ORSA
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
EBA and ECB Respond to Proposals on Sustainability Disclosures
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
EBA Publishes Multiple Regulatory Updates for Regulated Entities
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
EIOPA Issues SII Taxonomy and Guide on Sustainability Preferences
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
EESC Opines on Proposals on CRR and European Single Access Point
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury Publishes Multiple Regulatory Updates in July 2022
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.
