On 10 Oct 2024, the HKMA gazetted the commencement notice for the Banking (Capital) (Amendment) Rules 2023, setting 1 January 2025 as the effective date for Parts 3 and 5 to implement the Basel III final reform package. This will supersede prior transitional provisions and trigger consequential amendments to the Banking (Disclosure), (Liquidity), and (Exposure Limits) Rules, while Part 4 on haircut requirements will follow later.
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Introduction
On 10 Oct 2024, the Hong Kong Monetary Authority (HKMA) gazetted the Banking (Capital) (Amendment) Rules 2023 (Commencement) Notice 2024, appointing 1 January 2025 as the commencement date for Parts 3 and 5 of the Banking (Capital) (Amendment) Rules 2023 (BCAR), which incorporate the Basel III final reform package into local legislation.
Implementation of BCAR
The BCAR, approved by negative vetting of the Legislative Council in February 2024, amends existing capital adequacy regulations to align with the Basel Committee on Banking Supervision's final reform package. Parts 3 and 5 of the BCAR will commence on 1 January 2025, superseding prior transitional provisions that were designed for a staggered implementation of these parts.
Scope of Regulatory Changes
Part 3 of the BCAR introduces amendments to credit risk, output floor, operational risk, and sovereign concentration risk frameworks. Part 5 addresses market risk and credit valuation adjustment (CVA) risk. The consequential amendments to the Banking (Disclosure) Rules, Banking (Liquidity) Rules, and Banking (Exposure Limits) Rules, relating to the Basel II final package, will also take effect on 1 January 2025.
Exclusions and Next Steps
Part 4 of the BCAR, concerning minimum haircut requirements for securities financing transactions, is excluded from this commencement notice and will be implemented later following progress in other major jurisdictions. The Commencement Notice will be tabled before the Legislative Council on 16 October 2024 for negative vetting, with further notification upon completion.
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