On 19 Dec 2025, the HKMA issued revised CR-L-5 to clarify requirements for major share acquisitions under BELR Part 3, superseding prior guidelines. The update expands the trading book exemption threshold (Rule 23(2)(c)) for AI investments and clarifies consolidated supervision rules, while detailing consent procedures, refusal criteria, and deemed consent provisions from the 2019 regulatory transition.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction and Scope
On 19 Dec 2025, the Hong Kong Monetary Authority (HKMA) issued revised Guideline CR-L-5, superseding previous versions (V.1 dated 31.08.01 and V.2 dated 09.08.19), to clarify the supervisory approach for major acquisitions and investments under Banking (Exposure Limits) Rules (BELR) Part 3. The guideline applies to all Authorized Institutions (AIs) incorporated in Hong Kong and sets out the HKMA's criteria for exercising consent powers under Rule 24(1) of the BELR.
Exemptions and Thresholds
The guideline establishes that prior HKMA consent is not required for share acquisitions where the aggregate value of the acquisition and existing holdings remains below 5% of an AI's Tier 1 capital at the time of acquisition. A key revision expands the exemption under Rule 23(2)(c) for trading book investments: AIs may book equity exposures in their trading book without prior consent if the 'assessment amount' (defined as the relevant equity exposure booked in the trading book) is below 5% of Tier 1 capital. AIs may apply for a higher threshold (e.g., for specialized or small AIs), requiring submission of business cases, proposed thresholds, risk controls, and justification. The HKMA will approve higher thresholds only if consistent with the AI's business model and risk profile.
Consolidated Supervision and Deemed Consent
Under consolidated supervision (Rule 6), acquisitions through consolidated subsidiaries require prior consent if the value meets or exceeds 5% of the AI's consolidated Tier 1 capital, unless Rule 23(2) exemptions apply. The guideline also clarifies deemed consent provisions: prior approvals under former Section 87A(2)(a) of the Banking Ordinance (effective before 1 July 2019) are deemed consent under Rule 24(1) as of 1 July 2019, with conditions attached to such approvals deemed applicable. AIs must complete acquisitions by 30 September 2019 if approval was granted pre-1 July 2019.
Application Procedures and Conditions
AIs must submit formal written notices to the HKMA before acquisitions, including details on company structure, financial impact, funding sources, and risk management. The HKMA may refuse consent if acquisitions threaten depositor interests, considering factors such as financial capacity, risk exposure, management quality, and regulatory environment. Consent may be granted with conditions (e.g., monitoring requirements), which the HKMA may amend or revoke. Revocation may occur if the AI's shareholding exceeds the threshold due to capital changes, requiring reduction to below 5% of Tier 1 capital within a reasonable timeframe.
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