On 24 Oct 2024, the HKMA proposed revised disclosure requirements for loss-absorbing capacity instruments under the LAC Rules, mandating semi-annual reporting via Template CCA(A) for resolution entities. The proposals require detailed disclosure of capital instrument features including conversion/write-down triggers, subordination, and enforceability for non-HK law instruments, replacing the previous template and specifying reporting standards for regulatory capital and LAC purposes.
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Introduction
On 24 Oct 2024, the Hong Kong Monetary Authority (HKMA) published revised standard LAC disclosure template (Template CCA(A)) and updated Code of Practice chapter LAC-1 'Resolution Planning – LAC Requirements', proposing amendments to existing disclosure requirements under the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements — Banking Sector) Rules.
Purpose and Scope
The revised Template CCA(A) mandates resolution entities and material subsidiaries to disclose qualitative and quantitative features of Common Equity Tier 1 (CET1), Additional Tier 1 (AT1), Tier 2 (T2) capital instruments, and non-capital LAC debt instruments recognised in their loss-absorbing capacity under the LAC Rules. This disclosure is required on a semi-annual basis and whenever material changes occur to instruments, including issuances, repayments, or redemption/conversion terms.
Key Reporting Requirements
The template requires detailed reporting on instrument characteristics including unique identifiers, governing law, regulatory capital treatment, instrument type, par value, accounting classification, coupon/dividend terms, conversion/write-down triggers, and subordination features. For non-capital LAC debt instruments governed by non-Hong Kong law, resolution entities must confirm enforceability of resolution powers via independent legal advice. The template replaces obsolete rows (e.g., rows 4, 36, 37) and specifies standard reporting options for each field.
Implementation and Compliance
Resolution entities must update the template for all instruments included in external/internal loss-absorbing capacity on a consolidated basis. The full terms of instruments must be available on the entity's website. Entities may use a group company's website for disclosure with prior approval, but Hong Kong-incorporated Authorised Institutions must use the parent bankholding company's website for regulatory capital instruments. Instruments must be categorised by purpose (regulatory capital only, both capital and LAC, or LAC only) across three horizontal sections.
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