On 27 Nov 2025, the HKMA revised LAC disclosure templates TLAC1 and TLAC1(A) to standardise mandatory semi-annual reporting of external and internal loss-absorbing capacity compositions at the LAC consolidation group level for resolution entities and material subsidiaries under the LAC Rules. The revisions align with BCBS standards while incorporating Hong Kong-specific adjustments, including mandatory narrative commentary and clarified deduction rules for non-consolidated group liabilities.
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Introduction
On 27 Nov 2025, the Hong Kong Monetary Authority (HKMA) issued revisions to the standard Loss-Absorbing Capacity (LAC) disclosure templates, specifically Template TLAC1 and Template TLAC1(A), to align with the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements — Banking Sector) Rules (LAC Rules). These revisions standardise mandatory semi-annual disclosures for resolution entities and material subsidiaries regarding their external and internal loss-absorbing capacity compositions at the LAC consolidation group level.
Purpose and Scope of Revised Templates
Template TLAC1 is mandatory for all resolution entities under the LAC Rules to disclose the composition of their external loss-absorbing capacity (ELAC) at the LAC consolidation group level, replacing the BCBS template's resolution group focus. Template TLAC1(A) is mandatory for all material subsidiaries to disclose internal loss-absorbing capacity (ILAC) composition at the same LAC consolidation group level. Both templates require carrying values corresponding to financial statements, with resolution entities and material subsidiaries required to supplement disclosures with narrative commentary explaining significant changes and key drivers, including qualitative resolution strategy details.
Key Reporting Requirements and Technical Adjustments
The revised templates mandate semi-annual reporting with fixed formats. Critical technical adjustments include: (1) ELAC/ILAC calculations based on risk-weighted amounts and exposure measures under the LAC Rules at the LAC consolidation group level (not resolution group); (2) Deductions for holdings of non-capital LAC liabilities issued by non-LAC consolidation group entities (rows 19-21 for TLAC1, rows 19-21 for TLAC1(A)); (3) Currency conversion using Hong Kong dollar exchange rates for non-HKD functional currencies; (4) Specific exclusions for Hong Kong (e.g., FSB TLAC Term Sheet exemptions not applicable). For authorised institutions (Al) with matching LAC and capital consolidation groups, rows 27-31 may be reported in a separate document (e.g., template KM1) instead of the templates.
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