HKMA issued a letter informing all authorized institutions that negative vetting of the Banking (Liquidity) (Amendment) Rules 2019 (BLAR) has now expired. Thus, the BLAR will now come into operation from January 01, 2020. The main changes to the Banking (Liquidity) Rules are to recognize Basel-compliant listed ordinary shares and triple-B rated marketable debt securities as “level 2B assets” and “liquefiable assets” under the Liquidity Coverage Ratio (LCR) and the Liquidity Maintenance Ratio, respectively. The changes to BLAR also implement a funding requirement on total derivative liabilities under the Net Stable Funding Ratio (NSFR) and the Core Funding Ratio.
The BLAR amends the Banking (Liquidity) Rules. The key changes relate to recognition of the Basel-compliant listed ordinary shares and certain marketable debt securities issued by corporates, sovereigns, central banks, or public-sector entities as level 2B assets in calculating LCR of a category 1 institution ratio and as liquefiable assets in calculating the Liquidity Maintenance Ratio of a category 2 institution. The amendments also relate to the implementation of a required stable funding factor of 5% on total derivative liabilities (before adjustments) in calculating NSFR of a category 1 institution and a required core funding factor of 5% on total derivative liabilities (before adjustments) in calculating the core funding ratio of a category 2A institution. The BLAR 2019 also makes amendments to LCR provisions in the Banking (Liquidity) Rules to reflect the latest BCBS guidance on the eligibility of level 2B assets.
Effective Date: January 01, 2020
Keywords: Asia Pacific, Hong Kong, Banking, BLAR, Basel III, LCR, NSFR, Liquidity Risk, Liquidity Maintenance Ratio, HKMA
Previous ArticleFSI Examines Use of Red Team Testing to Enhance Cyber Resilience
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.