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62.4756

Capital

The capital requirements applicable to authorized institutions (AIs) are provided mainly in the Banking (Capital) Rules (BCR) issued by the Monetary Authority under section 97C(1) of the Banking Ordinance (BO). Under the BCR, locally incorporated AIs are required to comply with the minimum capital adequacy ratio (CAR) requirements applicable to them (i.e. the minimum CAR set out in sections 3A and 3B of the BCR as varied under section 97F of the BO). CAR is a collective term referring to the three risk-weighted capital ratios, namely the (a) Common Equity Tier 1 capital ratio; (b) Tier 1 capital ratio; and (c) Total capital ratio, prescribed under Basel III.

The HKMA has issued a Supervisory Policy Manual module CA-G-1 “Overview of Capital Adequacy Regime for Locally Incorporated Authorized Institutions” setting out the HKMA’s policy on capital adequacy for AIs and providing an overview of the framework for the calculation of such AIs’ CAR. AIs are also required to manage and calculate certain components of CAR according to the guidelines provided in some other SPMs as applicable.

Locally incorporated authorized institutions are required to maintain capital buffers (i.e. capital conservation buffer, countercyclical buffer and, in the case of those considered by the Monetary Authority as systemically important, higher loss absorbency buffer) on top of the three minimum capital ratios. The capital buffers, which must be met by Common Equity Tier 1 capital, are intended to bolster resilience of the banking sector against adverse economic developments and, in the case of the higher loss absorbency buffer, to limit potential negative externalities posed by systemically important authorized institutions were they to become non-viable. If any of the capital buffers maintained by an authorized institution is lower than the level prescribed in the BCR, the institution will be subject to restrictions on its ability to make distributions so that it can restore the capital buffer to the desired level.

Capital Rules

Banking (Capital) Rules (Cap. 155L)

Guidance

Notes for Reference of Document set out in the tables below:
XX-X-N = SPM Module Code, CIR = Circulars, N.N.N = Guideline No, FAQ = Frequently Asked Questions, QB = Quarterly Bulletin, PP = Policy Paper

Reference

Document

Issued

CIR

Interest Rate Risk in the Banking Book: Local Implementation Timeline

26/09/2017

CIR

Market Risk Capital Requirements: Local Implementation Timeline

23/06/2017

CIR

Local implementation of Basel Committee Standards on Interest Rate Risk in the Banking Book

27/02/2017

CIR

Banking (Disclosure) (Amendment) Rules 2016 and Banking (Specification of Class of Exempted Charges) (Amendment) Notice 2016

30/12/2016

CA-G-5

Supervisory Review Process

08/04/2016

CIR

Supervisory Policy Manual (SPM): CA-G-5 Supervisory Review Process

08/04/2016

CIR

Return of Quarterly Reporting on the Countercyclical Capital Buffer (Form MA(BS)25) and Revised Return on Capital Adequacy Ratio (Form MA(BS)3)

04/03/2016

CIR

Revised Framework for Market Risk Capital Requirements

19/01/2016

CIR

Return of Quarterly Reporting on the Countercyclical Capital Buffer (Form MA(BS)25) and Revised Return on Capital Adequacy Ratio (Form MA(BS)3)

04/12/2015

CIR

Banking (Capital) (Amendment) Rules 2015

27/11/2015

CIR

Banking (Capital) (Amendment) Rules 2015

23/10/2015

CIR

Supervisory Policy Manual (“SPM”) CA-G-1: “Overview of Capital Adequacy Regime for Locally Incorporated Authorized Institutions” (Revised)

27/02/2015

CA-G-1

Overview of Capital Adequacy Regime for Locally Incorporated Authorized Institutions

27/02/2015

CIR

Implementation guidance on Banking (Capital) Rules and Banking (Disclosure) Rules

31/12/2014

CIR

Implementation of Basel III

24/12/2014

CIR

Basel Capital Framework - Revisions to the Securitisation Framework

17/12/2014

CIR

Implementation of Basel III

27/11/2014

CIR

Implementation of Basel III

24/10/2014

CIR

Issuance and implementation of a final standard for the capital treatment of bank exposures to central counterparties

16/04/2014

CIR

Implementation of new standardised approach for measuring counterparty credit risk exposures

10/04/2014

CIR

BCBS guidance on A Sound Capital Planning Process

07/02/2014

CIR

Internal Ratings-based Approach : Revised Capital Floor Requirements

20/12/2013

PP

Recognition of External Credit Assessment Institutions (Revised)

30/09/2013

CIR

Basel III implementation - Frequently Asked Questions ("FAQs")

04/09/2013

CA-G-3

Use of Internal Models Approach to Calculate Market Risk

11/10/2012

CA-G-4

Validating Risk Rating Systems under the IRB Approaches

14/02/2006

IR-1

Interest Rate Risk in the Banking Book

13/12/2002

Returns

MA(BS)3 - Capital Adequacy Ratio

MA(BS)12 - Interest Rate Risk Exposures

MA(BS)12(i) - Interest Rate Risk Exposures (Supplementary Information)

Last revision date: 29 September 2017
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