HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
The HKMA has therefore started its implementation of a market risk capital regime in Hong Kong based on the framework incorporated in the Amendment to the 1988 Capital Accord issued by the Basle Committee in January 1996. The implementation is generally supported by the industry and in line with the HKMA's approach of following international standards.
To facilitate the development of the regime, two surveys were conducted: a quantitative survey to assess the level of market risk exposures of local institutions and a qualitative survey on selected institutions' market risk management systems and related financial models.
As mentioned in the Annual Report of 1995, the HKMA will adopt a three-tier approach in the implementation of the market risk regime, namely the standardised approach, the models approach (the use of which is subject to the HKMA's approval), and a de minimis exemption.
The HKMA also introduced a regular return on market risks at the end of the year. The reporting framework is based on the standardised methodology of measuring market risk in the Basle proposals and simplified where appropriate to take into account the relatively simple nature of the market risk activities and the generally low level of exposures of local institutions. The HKMA will establish an appropriate de minimis threshold based on the statistical data obtained from this return.
CREDIT REFERENCE SERVICES
The development of a fully-fledged credit reference agency in Hong Kong has been the subject of study by the HKMA in 1996. This recognises that there is a growing need for banks to improve the accuracy of their credit assessment in view of the trend for banks to diversify their consumer lending portfolio from asset backed loans into unsecured loans such as credit cards and personal loans.
The study by the HKMA on this issue suggested that there appeared to be a strong case for having a fully-fledged credit reference agency in Hong Kong. The sharing of credit information will enable authorised institutions to make more informed assessments of their customer's credit standing and this should in turn improve institutions' asset quality. Also, the adverse impact of having a bad credit record should encourage customers to be more responsible in their payments. Although there are several issues which need to be addressed such as the handling of customer information and the reluctance of some banks to share information, none of these factors should prevent the development of such an agency in Hong Kong.