On 27 Nov 2025, the HKMA mandated revised LAC disclosure templates TLAC1 and TLAC1(A) for resolution entities and material subsidiaries under the LAC Rules, requiring semi-annual reporting of external/internal loss-absorbing capacity at the LAC consolidation group level. The templates implement Hong Kong-specific adjustments to BCBS standards, excluding non-applicable FSB provisions and specifying detailed reporting mechanics for capital components and deductions.
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Introduction
On 27 Nov 2025, the Hong Kong Monetary Authority (HKMA) issued revisions to standard Loss-Absorbing Capacity (LAC) disclosure templates, mandating updated reporting frameworks for resolution entities and material subsidiaries under the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements — Banking Sector) Rules.
Mandatory Reporting Framework
The revised templates TLAC1 (for resolution entities) and TLAC1(A) (for material subsidiaries) are mandatory under the LAC Rules. Resolution entities must report external loss-absorbing capacity composition at the LAC consolidation group level semi-annually using fixed formats. Material subsidiaries must report internal loss-absorbing capacity composition at the same level. Both templates require accompanying narrative commentary explaining significant changes and key drivers, with optional qualitative resolution strategy disclosures.
Key Structural Adjustments from BCBS Standards
The HKMA tailored BCBS Pillar 3 template TLAC1 for Hong Kong's framework, shifting the reporting focus from resolution group level to LAC consolidation group level. This aligns with the LAC Rules' requirement that resolution entities maintain external LAC ratios at or above specified minimums on a consolidated basis. The templates exclude non-applicable BCBS elements (e.g., FSB TLAC Term Sheet exemptions for funding vehicles, ex ante commitments, and pari passu subordination), explicitly stating these do not apply under Hong Kong's LAC Rules.
Template Specifications and Reporting Mechanics
Both templates feature 31 rows categorizing regulatory capital elements (rows 1-11), non-regulatory capital elements (rows 12-17), and adjustments (rows 18-22). Key requirements include: reporting absolute amounts regardless of addition/deduction; using Hong Kong dollar conversions at end-period T/T rates for foreign functional currencies; and applying specific deductions for holdings of non-capital LAC liabilities (rows 19-21). For Advanced Approaches (Al) institutions with aligned consolidation groups, rows 27-31 may be reported separately via template KM1 per LAC Rules rule 52(2).
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