On 27 Nov 2025, the HKMA updated its CR-L-5 guidance on major acquisitions under BELR Part 3, clarifying Tier 1 capital thresholds for prior consent, expanding exemptions for trading book investments (including higher threshold applications), and detailing consolidated supervision requirements. The revision supersedes prior versions and mandates advance MA notification for acquisitions exceeding 5% of Tier 1 capital or posing material risks to AIs' capital adequacy or reputation.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction and Scope
On 27 Nov 2025, the Hong Kong Monetary Authority (HKMA) issued the revised Supervisory Policy Manual (SPM) module CR-L-5, which supersedes previous versions to provide updated guidance on major acquisitions and investments by Authorized Institutions (AIs) under Banking (Exposure Limits) Rules (BELR) Part 3. The module clarifies the MA's supervisory approach for acquisitions exceeding 5% of an AI's Tier 1 capital, including exemptions, application procedures, and conditions for consent.
Tier 1 Capital Threshold and Calculation
The revised guidance specifies that the 5% threshold for prior MA consent applies to acquisitions where the value of shares (at book value plus unpaid amounts) equals or exceeds 5% of an AI's Tier 1 capital at the time of acquisition. Tier 1 capital is defined under the Banking (Capital) Rules and typically uses the previous quarter's figure, though the MA may require the latest figure if a significant decline has occurred. The threshold is recalculated if subsequent changes in Tier 1 capital or market value cause holdings to exceed 5%.
Exemptions and Trading Book Thresholds
Rule 23(2)(c) exempts acquisitions booked in the AI's trading book if the 'assessment amount' (equity exposure attributable to the company) remains below 5% of Tier 1 capital. AIs may apply for a higher threshold (e.g., 10%) if justified by operational needs, particularly for specialized or small AIs. Applications must include a business case, proposed threshold, risk controls, and rationale. The MA will approve higher thresholds only if consistent with the AI's business model and risk management.
Consolidated Supervision and Deemed Consent
Under consolidated supervision (Rule 6), acquisitions through consolidated subsidiaries require MA consent if the value equals or exceeds 5% of the AI's consolidated Tier 1 capital. The guidance clarifies that prior approvals under pre-2019 rules are deemed consent under Rule 24(1) as of 1 July 2019, with conditions attached to such approvals deemed applicable. AIs must complete acquisitions under deemed consent by 30 September 2019.
Application Procedures and Conditions
AIs must submit written applications to the MA before acquisition, detailing the company, acquisition value, capital impact, funding, business rationale, and risk controls. The MA may attach conditions to consent (e.g., monitoring requirements) or revoke consent if risks to depositors emerge. Refusal reasons must be provided in advance for AI representation. AIs must also notify the MA one month in advance of acquisitions significantly impacting financial position, strategy, or reputation.
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