The Basel Committee on Banking Supervision (BCBS) issued two documents on November 11, 2021: Revisions to market risk disclosure requirements and Voluntary disclosure of sovereign exposures. BCBS proposed January 01, 2023 as the effective date for both sets of disclosure requirements. However, the Hong Kong Monetary Authority (HKMA) plans to implement the revised market risk disclosure requirements when the revised market risk framework comes into effect—that is, no earlier than January 01, 2024. Additionally, HKMA plans to evaluate the need to implement the voluntary disclosure requirements on sovereign exposures, for instance, to the extent to which equivalent disclosures are already being made by authorized institutions.
The adjustments to the market risk disclosure requirements mainly reflect the revised market risk framework published by BCBS in January 2019 (covering, for instance, the “traffic light” approach for capital requirements as a consequence of the outcome of the profit and loss attribution test for banks using the internal models approach and the simplified standardized approach as an alternative way of calculating market risk capital requirements). Additionally, the voluntary disclosure requirements on sovereign exposures comprise three templates for banks to disclose such exposures respectively by jurisdictional breakdown, by currency breakdown, and according to the accounting classification of the exposures. Though these disclosures are voluntary in nature, supervisors are free to decide whether to implement the requirements in their jurisdictions. In due course, HKMA will consult the industry on its implementation proposals for both these disclosure requirements.
Keywords: Asia Pacific, Hong Kong, Banking, Market Risk, Sovereign Risk, Disclosures, Basel, Reporting, BCBS, HKMA
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