On 26 Sep 2024, the HKMA revised Completion Instructions for the Large Exposures Return (MA(BS)28), clarifying reporting requirements under the Banking (Exposure Limits) Rules. The proposals enhance CRM treatment flexibility for overseas incorporated banks, specify quarterly deadlines based on incorporation status, and provide detailed guidance on exposure calculation, indirect exposures, and column-specific reporting to align with Basel Framework standards.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
Opening Bank Accounts: Duties of Banks in Hong Kong to Combat Tax Evasion
Hong Kong money laundering laws require banks to assess the risk of tax evasion in evaluating bank account opening applications. Prospective customers applying
Opening a Bank Account in Hong Kong: Latest Regulatory Developments
For many new businesses, opening a bank account is a mission critical task. Unfortunately, as a result of significant growth in laws intended to combat money l
SPOTLIGHT ON
FAMILY OFFICES
Introduction and Purpose
On 26 Sep 2024, the Hong Kong Monetary Authority (HKMA) issued revised Completion Instructions for the Large Exposures Return (Form MA(BS)28), which updates reporting requirements under the Banking (Exposure Limits) Rules (Cap. 1558) (BELR) to align with current regulatory expectations and clarify implementation details for authorized institutions.
Reporting Requirements and Deadlines
The revised instructions specify quarterly reporting deadlines for authorized institutions (AIs) based on incorporation status: locally incorporated AIs must submit combined Hong Kong office and overseas branch positions within one month after each quarter-end; overseas incorporated AIs must report consolidated positions (including head office and branches) or Hong Kong office-only positions within the same timeframe. Deadlines are deferred to the next working day if falling on a public holiday.
Key Definitions and Exposure Calculations
The document clarifies critical terms including 'connected party' (covering subsidiaries, senior management, and related entities), 'group affiliate' (entities consolidated under HKFRS/IFRS), and 'exempted exposure before CRM' (exposures disregarded under BELR rules 48(1) and 57). It details exposure determination: 'before CRM' excludes credit risk mitigation effects (e.g., collateral), while 'after CRM' includes recognized credit risk mitigation (CRM), with specific rules for indirect exposures and intragroup transactions.
Enhanced CRM Treatment for Overseas Incorporated AIs
The proposals establish new reporting flexibility for overseas incorporated AIs regarding CRM treatment: they may apply either (a) the BELR's CRM provisions as if they were Category A/B institutions (paragraph 19), or (b) equivalent home jurisdiction mechanisms under the Basel Framework's LEX standard (paragraph 20). An alternative measurement approach for collateral-based indirect exposures is permitted if AIs notify HKMA two weeks in advance and maintain consistent application (paragraphs 16-18).
Column-Specific Reporting Instructions
Detailed guidance is provided for each reporting column in MA(BS)28, including: (1) maximum exposure before/after CRM (Column 2); (2) on-balance sheet exposures (Column 3); (3) trading book exposures (Column 4); (4) off-balance sheet exposures (Column 5); (5) default risk exposures from derivatives/SFTs (Column 6); and (6) exempted exposures (Column 11). Special rules clarify reporting of joint accounts, Nostro balances, and economic sector classification (Columns 13-14).
View the full article:Source
