The Hong Kong Monetary Authority ("HKMA") completed its annual assessment of Domestic Systemically Important Authorized Institutions ("D-SIBs") on 31 December 2025. The list remains unchanged from the previous year.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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The Hong Kong Monetary Authority ("HKMA") has finalized its annual evaluation of the Domestic Systemically Important Authorized Institutions ("D-SIBs"). The list of institutions designated as D-SIBs remains consistent with the December 31, 2024, roster. The most recent list of D-SIBs is detailed in the Annex.
In compliance with the D-SIB framework, each institution designated as a D-SIB is mandatorily required to integrate a Higher Loss Absorbency ("HLA") requirement into its regulatory capital buffers over a span of 12 months following its formal designation notification. The HLA requirement ranges from 1% to 3.5%, contingent upon the assessed level of systemic importance. The HLA requirements remain unchanged from the December 31, 2024, roster.
Background
- D-SIB Framework in Hong Kong
The Banking (Capital) Rules and the HKMA's regulatory framework for D-SIBs align with guidelines issued by the Basel Committee on Banking Supervision in October 2012. This framework enables the Monetary Authority to identify an authorized institution as a D-SIB if deemed systemically significant, mandating an HLA capital buffer for these institutions to mitigate their potential impact on the domestic financial system and economy.
- HLA Requirement for Authorized Institutions Designated as D-SIBs
The HKMA has the authority to designate D-SIBs and specify an HLA requirement based on their assessed domestic systemic importance. D-SIBs are categorized into different HLA 'buckets' based on their degree of systemic significance. Currently, five HLA buckets are defined, with percentages ranging from 1% to 3.5%, though only the first four buckets are populated. The 3.5% bucket remains empty, serving as an incentive for institutions to reduce their systemic importance.
Designated D-SIBs must incorporate the HLA in the computation of their regulatory capital buffers within 12 months of receiving their designation notification. The HLA, in conjunction with the Countercyclical Capital Buffer, extends the Basel III Capital Conservation Buffer. Institutions with CET1 capital ratios falling within this range will be subject to limitations on discretionary distributions, necessitating them to retain earnings to reinforce their regulatory capital.
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