Featured Product

    HKMA Consults on Policy Module on Pillar 2 Supervisory Review Process

    September 13, 2019

    HKMA is consulting on the revised Supervisory Policy Manual module CA-G-5 that sets out the HKMA approach to conducting the supervisory review process under Pillar 2. This review includes the criteria and standards used for evaluating the capital adequacy of an authorized institution and, where applicable, the effectiveness of the capital adequacy assessment process of an authorized institution, for determining its Pillar 2 capital requirement. The consultation closes on October 18, 2019.

    The module CA-G-5 describes how the Pillar 2 framework will operate under the capital adequacy framework and is applicable to all locally incorporated authorized institutions. This module should be read in conjunction with the Banking (Capital) Rules and other supervisory guidelines, including the modules of the Supervisory Policy Manual, issued by HKMA that are relevant to the assessment of capital adequacy of authorized institutions. Annex A to the module CA-G-5 presents a list of the supervisory guidelines that are applicable to the assessment of the capital adequacy of authorized institutions under the supervisory review process. With the implementation of Basel III (including the requirements in respect of the Banking (Capital) Rules buffer level), this module had been updated to illustrate the following:

    • Operation of Pillar 2 within the revised capital adequacy framework (including the positioning of the Pillar 2 capital requirement in the capital hierarchy)
    • Approach to allocating the Pillar 2 capital requirement among the common equity tier 1 capital ratio, tier 1 capital ratio, and total capital ratio
    • Differentiation of P2A and P2B capital and how the Banking (Capital) Rules buffer level is taken into account to address any overlap

    "P2A” means the portion of the Pillar 2 capital requirement that reflects risks not captured, or not adequately captured, in Pillar 1 while “P2B” means the portion of the Pillar 2 capital requirement that provides a cushion of capital to bolster resilience in times of stress without reference to specific risks considered under P2A. HKMA has conducted the supervisory review on authorized institutions since January 01, 2007 as part of its risk-based supervisory process. The main purposes of the supervisory review process are to assess capital adequacy of authorized institutions and to determine if they should hold additional capital to cater for risks that are not covered, or not adequately covered, under Pillar 1. The scope and extent of applying the assessment standards and criteria under the supervisory review process are commensurate with the nature, size, and complexity of the business operations of individual authorized institutions. The basic elements of the supervisory review process are embedded in the supervisory framework of HKMA. 

     

    Comment Due Date: October 18, 2019

    Keywords: Asia Pacific, Hong Kong, Banking, Supervisory Policy Manual, Pillar 2, Basel III, Capital Adequacy, Supervisory Review Process, Banking Capital Rules, HKMA

    Featured Experts
    Related Articles
    News

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk.

    October 17, 2019 WebPage Regulatory News
    News

    FSB Report Examines Implementation and Impact of G20 Financial Reforms

    FSB published fifth annual report on the implementation and effects of the G20 financial regulatory reforms.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Launches Consultation on Comprehensive Pillar 3 Disclosures

    EBA proposed the new comprehensive implementing technical standard (ITS) for public disclosures by financial institutions.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Consults on Revised Technical Standards on Supervisory Reporting

    EBA launched a consultation on the revised implementing technical standards, or ITS, on supervisory reporting.

    October 16, 2019 WebPage Regulatory News
    News

    BoE and FCA Examine Use of Machine Learning in Financial Sector in UK

    BoE and FCA published a report on the results of a joint survey by BoE and FCA in 2019 to better understand the use of machine learning in the financial services sector in UK.

    October 16, 2019 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel Framework

    BCBS published the seventeenth progress report on adoption of Basel regulatory framework.

    October 16, 2019 WebPage Regulatory News
    News

    APRA Proposes Measures to Strengthen Capital for Bank Depositors

    APRA proposed changes to APS 111, which is the prudential standard on measuring capital adequacy and establishes the criteria for regulatory capital requirements of authorized deposit-taking institutions.

    October 15, 2019 WebPage Regulatory News
    News

    EIOPA Consults on Technical Advice for the 2020 Review of Solvency II

    EIOPA is consulting on an opinion that sets out technical advice for the 2020 review of Solvency II.

    October 15, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3981