HKMA Completes the New Public Disclosure Regime for Authorized Institutions

The Hong Kong Monetary Authority (HKMA) today (Wednesday) issued a non-statutory guideline on the application of the Banking (Disclosure) Rules (the "Rules") which came into effect on 1 January 2007. The issuance of the Guideline completed the introduction of the new disclosure regime for Authorized Institutions (AIs) that was established by the Rules.

The Rules and the guideline constitute a comprehensive set of disclosure requirements for all AIs (both locally and overseas incorporated) in respect of their profit and loss, state of affairs and capital adequacy ratio. In most cases AIs will make their first disclosures under the new regime in respect of their interim positions as at 30 June 2007.

The guideline provides supplementary guidance concerning the application of the Rules, particularly on how certain of the requirements should be interpreted. It has been developed in response to requests the HKMA received during the consultation process on the Rules for an explanation of certain provisions in non-technical language. It also includes a complete set of definitions of terms used in the Rules including relevant terms from the Banking (Capital) Rules at the request of both the industry and the accounting profession.

"The new public disclosure regime will enhance the transparency of authorized institutions and will help ensure that relevant and timely information is available to the public, the investor community, and market professionals," said Simon Topping, HKMA Executive Director (Banking Policy). "This enhanced transparency is particularly important in view of recent important changes in accounting standards and regulatory requirements, introduced to keep the business and regulatory environment in Hong Kong on a par with other top international financial centres."

In line with the HKMA's policy of adhering closely to international standards, the new public disclosure requirements are closely aligned with international best practices, in particular those recommended by the Basel Committee on Banking Supervision.

The new disclosure regime was developed after extensive consultation with the banking industry, with the accounting profession, and with potential users of the disclosures, including credit rating agencies and equity analysts. It reflects a very clear demand by market participants and financial analysts for more extensive and more detailed public disclosures by AIs. At the same time, the HKMA has sought to keep the disclosure burden to a minimum, for example by permitting AIs to make many of the required disclosures on their Hong Kong-based internet websites or by relying on disclosures made for other purposes, for example under Hong Kong Financial Reporting Standards.

"The HKMA is very appreciative of the cooperation we received from the banking industry and the Hong Kong Institute of Certified Public Accountants in helping us develop the new regime," added Mr Topping. "Enhancing disclosure brings benefits but also carries costs, and the industry involvement helped in striking an appropriate balance."

The Rules, which have the status of subsidiary legislation, specify detailed interim and annual disclosure requirements for AIs that vary according to the scale and sophistication of the institution. Illustrative examples, or sample disclosure templates have been included in the guideline to assist AIs in complying with specific requirements of the Rules. The guideline is available on the HKMA website at http://www.hkma.gov.hk.

For further enquiries, please contact:
Sara Yip, Manager (Press), at 2878 8246 or
Hing-Fung Wong, Officer (Press), at 2878 1802

Hong Kong Monetary Authority
30 May 2007