HKMA issued a set of standard disclosure templates (with accompanying explanatory notes) for the loss-absorbing capacity under the Financial Institutions (Resolution) (Loss-Absorbing Capacity Requirements – Banking Sector) Rules (Cap. 628B)—also known as LAC Rules. The templates are to be used by resolution entities and material subsidiaries for making disclosures under Part 6 of the LAC Rules.
The standard templates are modeled on the five relevant templates—namely KM2, CCA, TLAC1, TLAC2, and TLAC3—from the BCBS March 2017 publication on Pillar 3 disclosure requirements. The applicability of these templates has been adjusted to reflect that both resolution entities and material subsidiaries are subject to relevant disclosure obligations under the LAC Rules. The standard templates consist of the following:
- KM2, KM2(A), and KM2(B), reflecting the requirement under rule 47 of the LAC Rules on a resolution entity or a material subsidiary to disclose summary information on its loss-absorbing capacity and, as applicable, that on the non-HK resolution entity
- CCA(A), reflecting the requirement under rule 51 of the LAC Rules on a resolution entity or a material subsidiary to disclose the main features of its regulatory capital instruments and of other non-capital LAC debt instruments
- TLAC1 and TLAC1(A), reflecting the requirement under rule 48 of the LAC Rules on a resolution entity or a material subsidiary to disclose the composition of its loss-absorbing capacity
- TLAC2, reflecting the requirement under rule 50 of the LAC Rules on a material subsidiary to disclose information on its creditor ranking at legal entity level
- TLAC3, reflecting the requirement under rule 49 of the LAC Rules on a resolution entity to disclose information on its creditor ranking at legal entity level
In accordance with the LAC Rules, a requirement on a resolution entity or a material subsidiary to make a quarterly or semi-annual disclosure under Part 6 of the LAC Rules applies in relation to each quarterly reporting period or semi-annual reporting period (as the case requires) of the entity (the period ends at least three months after the classification date of the entity). For the requirement under rule 55(4) of the LAC Rules, a resolution entity or a material subsidiary should lodge a copy of its disclosure statement under the Rules with the Resolution Office of HKMA before it publishes the statement. A resolution entity or a material subsidiary is required to submit a copy of the disclosure statement in Portable Document Format to HKMA by e-mail, within three working days after the first publication or exhibition of such information in Hong Kong, for HKMA to keep it with the register maintained under section 20 of the Banking Ordinance (Cap. 155).
Keywords: Asia Pacific, Hong Kong, Banking, Loss Absorbing Capacity, LAC Rules, Resolution, Pillar 3, TLAC, Reporting, Banking Disclosure, Disclosures, BCBS, HKMA
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.