On 06 Aug 2024, the HKMA published the revised SPM Module CA-D-1, superseding the 2019 version, to provide updated interpretative guidance on the Banking (Disclosure) Rules. The guideline clarifies exemption criteria, reinforces five disclosure principles, and details specific requirements for Hong Kong-incorporated and non-Hong Kong-incorporated Authorized Institutions, including standardized template usage, disclosure frequencies, and web-based publication protocols to enhance transparency and market discipline.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction and Purpose
On 06 Aug 2024, the Hong Kong Monetary Authority (HKMA) issued the revised Supervisory Policy Manual (SPM) Module CA-D-1, 'Guideline on the Application of the Banking (Disclosure) Rules' (V.4), superseding the previous version (V.3) dated 16.08.19. This non-statutory guideline provides interpretative guidance to Authorized Institutions (Als) on the application of the Banking (Disclosure) Rules (Cap. 155M), which establish minimum standards for public disclosure of an Al's state of affairs, including profit and loss and financial resources, to promote market discipline under the Basel Framework.
Key Regulatory Updates
The revised guideline updates the application framework for the Banking (Disclosure) Rules (BDR), clarifying requirements for exemption eligibility, disclosure principles, and template usage. It replaces the previous guidance (V.3) and introduces detailed instructions on disclosure timing (e.g., quarterly disclosures within 8 weeks of period-end), the use of standard templates and tables (Annex A), and specific requirements for Als incorporated in Hong Kong versus those incorporated outside Hong Kong. The guidance emphasizes that the BDR apply to Als incorporated in Hong Kong (including subsidiaries of foreign banks) and Als incorporated outside Hong Kong operating branches in Hong Kong, subject to exemptions.
Exemption Framework
The guideline outlines two exemption pathways: (i) 'de minimis' exemption for Als meeting asset/deposit thresholds under sections 3(7), (8), or (9) of the BDR, assessed using a 12-month average of relevant figures; and (ii) exemption for Als not yet commenced business under section 3(14A), requiring justification and a business commencement plan. The HKMA will withdraw exemptions if an Al ceases to meet criteria, and Als must notify the HKMA immediately upon business commencement or exemption lapse.
Disclosure Principles
The guideline reinforces five core disclosure principles: (1) clarity (presented in accessible language with key messages highlighted), (2) comprehensiveness (covering main activities, significant risks, and management responses), (3) meaningfulness (focusing on significant risks and excluding non-value-adding information), (4) consistency (over time to enable trend analysis), and (5) comparability (across banks and jurisdictions). Als must ensure disclosures align with these principles to facilitate market understanding of risk profiles.
Requirements for Hong Kong-Incorporated Als
Als incorporated in Hong Kong must comply with Part 2 (general requirements) and Part 2A (specific disclosures) of the BDR. Key obligations include establishing a documented disclosure policy (section 5), using standard templates/tables (Annex A) for disclosures, publishing on internet websites with clear archiving (retaining disclosures since 30 June 2013), and adhering to frequency rules (e.g., quarterly disclosures within 8 weeks). The guideline specifies consolidated basis disclosures for most items, with exceptions for capital, liquidity, and Mainland activities, and requires comparative information for quantitative disclosures.
Requirements for Non-Hong Kong-Incorporated Als
Als incorporated outside Hong Kong must comply with Part 8 of the BDR, with tailored requirements for disclosure timing (e.g., quarterly disclosures within 8 weeks, annual within 4 months), use of standard templates for liquidity information (e.g., LCR, NSFR), and web-based disclosures on an internet website accessible to Hong Kong public. The guideline permits a 'prescribed summary' of disclosures instead of full statements, provided complete disclosures are readily accessible via specified links or locations. Als must lodge disclosure statements with the HKMA within 3 working days of publication.
Disclosure Templates and Frequency
The guideline specifies standard templates and tables (Annex A) for use by Als, categorized by applicability (Hong Kong-incorporated vs. non-Hong Kong-incorporated) and format (fixed or flexible). Disclosures must follow prescribed frequencies: quarterly for most items (e.g., credit risk templates), semi-annual for sector information, and annual for liquidity risk management. Als may exclude immaterial information but must explain exclusions and ensure aggregate disclosures align with balance sheet figures. Comparative information is required unless exceptions apply (e.g., new institutions or first-time implementation of new standards).
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