Banking (Amendment) Ordinance 2005

The Banking (Amendment) Ordinance 2005 was passed by the Legislative Council today (6 July).

The main purpose of the Ordinance is to amend the Banking Ordinance to put in place a legislative framework for the implementation in Hong Kong of the Basel Committee on Banking Supervision's revised capital adequacy standards for banks, commonly known as "Basel II".

The Ordinance provides that locally incorporated authorized institutions' (AIs) capital adequacy ratio (CAR) shall be calculated, and information on financial affairs including CAR shall be disclosed, in a manner to be prescribed in rules made by the Monetary Authority under the Banking Ordinance. It also provides that an AI that is aggrieved by a decision of the Monetary Authority made under the new capital rules may seek a review of the decision by an independent appeal body, the Capital Adequacy Review Tribunal.

The Ordinance also introduces some non-Basel II related amendments to improve the operation of individual provisions of the Banking Ordinance in the light of experience, including:

1. limiting the liability of managers of AIs, for certain offences under the Banking Ordinance, to cases where the contraventions result from an act or omission on the part of the manager personally or of a person under his control;
2. allowing a defence of "reasonable excuse" to certain offences under the Banking Ordinance; and
3. expressly providing that the Monetary Authority may publish details of disciplinary decisions in respect of the securities business of AIs.

The provisions of the Ordinance will come into operation in phases. Those relating to the new capital adequacy regime will commence operation in accordance with the timetable for implementing Basel II in Hong Kong.

The HKMA will proceed with the development of the capital and disclosure rules in consultation with the banking industry. It is expected that the rules will be tabled at the Legislative Council for negative vetting by mid-2006 after the statutory consultation process stipulated under the Ordinance.

For further enquiries, please contact:
Kevin Ip, Manager (Press), at 2878 1687 or
Hing-Fung Wong, Resource Co-ordinator, at 2878 1802

Hong Kong Monetary Authority
6 July 2005