On 19 Dec 2025, the HKMA approved amendments to the Banking (Exposure Limits) Code, effective 1 January 2026, to clarify guidance on Rules 20(4)(b), 37(2)/(3), and 41 of the Banking (Exposure Limits) Rules. The amendments specify criteria for assessing third-party data providers, self-use land treatment, and economic dependence, requiring institutions to evaluate dependencies through counterparty information and detailed financial linkage tests.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Amendment Details
On 19 Dec 2025, the Hong Kong Monetary Authority (HKMA) approved amendments to the Banking (Exposure Limits) Code, effective 1 January 2026, to provide updated guidance on specific provisions of the Banking (Exposure Limits) Rules (BELR). The amendments clarify regulatory expectations for authorized institutions regarding third-party data providers, self-use land treatment, and economic dependence criteria under Rules 20(4)(b), 37(2) and (3), and 41 of the BELR.
Guidance on Third-Party Data Providers
The amended guidance under Rule 20(4)(b) specifies that authorized institutions must assess a third-party market data provider’s competence and reliability based on five factors: market position and reputation, financial strength and service capability, track records, contingency service arrangements, and other relevant considerations. This replaces prior ambiguous standards with a structured evaluation framework.
Self-Use Land Treatment Guidance
Amended guidance under Rule 37(2) and (3) permits authorized institutions to treat entire premises as self-use land for business operations if an office is situated within part of the premises, provided written consent is obtained from the HKMA. Institutions may reference the HKMA’s 3 October 2019 circular for further clarification on this treatment.
Economic Dependence Criteria
The revised guidance under Rule 41 establishes detailed criteria for determining economic dependence between counterparties. An entity is economically dependent on another if financial distress in the latter would likely cause distress in the former, including scenarios where 50%+ of gross receipts/expenditures derive from the relationship, guarantees exist, or funding sources are shared. Institutions must verify such dependencies through counterparty-provided information during credit reviews and new facility approvals.
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