On 27 Nov 2025, the HKMA approved amendments to the Banking (Exposure Limits) Code, effective 1 January 2026, to provide operational guidance on Rules 20(4)(b), 37(2) and (3), and 41 of the Banking (Exposure Limits) Rules. The amendments clarify criteria for third-party market data provider assessments, self-use land treatment, and economic dependence determinations for counterparty groupings, replacing prior guidance while aligning with existing regulatory interpretations.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On 27 Nov 2025, the Hong Kong Monetary Authority (HKMA) approved amendments to the Banking (Exposure Limits) Code under section 97M of the Banking Ordinance (Chapter 155), effective 1 January 2026, to provide guidance on specific provisions of the Banking (Exposure Limits) Rules (BELR). The amended code replaces prior guidance and specifies Rules 20(4)(b), 37(2) and (3), and 41 as the relevant provisions for which the guidance applies.
Guidance on Rule 20(4)(b) for Third-Party Market Data Providers
The amended code establishes criteria for authorized institutions to assess the competence and reliability of third-party market data providers under Rule 20(4)(b). Institutions must evaluate the provider's market position, financial strength, track record, contingency arrangements, and other relevant factors. This guidance clarifies the verification requirement for information used in Formula 2 for valuing equity exposures in collective investment schemes (CIS).
Guidance on Rules 37(2) and (3) for Self-Use Land
The code references the HKMA circular dated 3 October 2019 to clarify when an authorized institution may treat the entirety of premises containing its office as self-use land under Rules 37(2) and (3). This guidance addresses circumstances where only part of premises houses an institution's office but the whole premises may be deemed used for business purposes, aligning with existing regulatory interpretation.
Guidance on Rule 41 for Economic Dependence
The amended code provides detailed criteria for determining 'economic dependence' under Rule 41, specifying that an entity (Entity A) is economically dependent on another (Entity B) if Entity B's financial distress would likely cause Entity A to face funding or repayment difficulties. Key indicators include 50%+ gross receipts/expenditures from Entity B, significant guarantees, product dependency, shared funding sources, or insolvency linkage. The guidance clarifies that economic dependence is not presumed solely from employer-employee relationships and mandates institutions to request counterparty information during credit reviews.
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