On 23 Dec 2025, the HKMA revised completion instructions for the IRRBB return (Form MA(BS)12A), mandating quarterly reporting of interest rate risk exposures for all locally incorporated and non-exempted overseas Authorized Institutions. The updates clarify currency reporting requirements (including CNY/CNH separation), position classification rules for fixed/floating/managed rate items, and detailed instructions for embedded options, coupon cash flows, and basis risk analysis. Institutions must report HKD and USD positions as mandatory currencies, with non-reported currencies capped at 10% of total interest rate-sensitive exposures.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction and Reporting Scope
On 23 Dec 2025, the Hong Kong Monetary Authority (HKMA) issued revised completion instructions for the Interest Rate Risk in the Banking Book (IRRBB) return (Form MA(BS)12A), clarifying reporting requirements for Authorized Institutions (AIs). The revised instructions specify that all locally incorporated AIs and non-exempted overseas AIs must submit quarterly IRRBB returns by six weeks after each quarter-end, reporting positions as at the last calendar day of the quarter. Locally incorporated AIs must report both solo (combined local and overseas offices) and consolidated positions, while overseas AIs report only Hong Kong operations.
Currency Reporting Requirements
The revised instructions mandate reporting positions for at least two currencies (Hong Kong dollars and US dollars) on a single return form, with nil returns required for these currencies. Institutions must treat onshore Renminbi (CNY) and offshore Renminbi (CNH) as separate currencies. Positions in non-reported currencies must not exceed 10% of total on-balance sheet interest rate-sensitive assets or liabilities (whichever is larger), with sequential numbering required for multiple currency forms. Major currencies are defined as those where positions exceed 5% of total interest rate-sensitive exposures.
Position Classification and Reporting Instructions
The instructions provide detailed guidance on classifying interest rate-sensitive assets and liabilities into fixed, floating, and managed rate items. For fixed rate items, residual maturity determines time bands; for floating rate items, next repricing date applies; and for managed rate items, the earliest adjustment date (assuming reference rate changes) is used. Embedded automatic interest rate options (e.g., prepayment options) must be decomposed into underlying assets/liabilities (reported on-balance sheet) and the options themselves (reported off-balance sheet under Item 14). Internal deals between banking and trading books are excluded from reporting for non-exempted institutions, while exempted institutions and overseas AIs must exclude all internal deals.
Key Reporting Updates
Revised instructions clarify reporting of coupon cash flows (Item 16), requiring institutions to choose consistently whether to include commercial margins/spread components. For basis risk analysis (Item 19), floating rate assets subject to prime rate caps must be reclassified as managed rate assets if the cap becomes binding under shock scenarios. Off-balance sheet positions (Items 10–15) now require delta-adjusted values for options (Item 14), with specific guidance on reporting forward contracts, swaps, and commitments. The instructions also specify that non-maturity deposits may be slotted using behavioral maturity methodology (subsection 5.3 of SPM IR-1).
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