In April 2014 the Basel Committee on Banking Supervision (BCBS) issued a “Supervisory framework for measuring and controlling large exposures” to replace the existing standards which were originally published in 1991. The new framework is designed to provide for the enhanced measurement of exposures in a manner which better reflects a bank’s economic loss when a counterparty defaults. It is also more comprehensive than the 1991 standards in terms of coverage and provides more detailed guidance in relation to the treatment of exposures arising from specific instruments.
The HKMA issued a consultation paper on 22 March 2016 which sets out proposals for (i) the implementation of this new BCBS framework and (ii) an update of other sections of Part XV (“Limitations on Loans by and Interests of Authorized Institutions”) of the Banking Ordinance.
Consultation Paper CP 16.01: Exposure Limits
CP 16.01: Exposure Limits, 22 March 2016 (PDF File, 465KB)