1 December 2006

Dear Sir/Madam,

Implementation of Basel II

Further to our letter of 27 October 2006, I write to inform you that the Legislative Council (LegCo) has completed its negative vetting on the Banking (Capital) Rules and Banking (Disclosure) Rules gazetted on 27 October 2006.

In addition, two resolutions containing minor refinements to the Rules were passed by LegCo on 29 November 2006 and published in the Gazette today (Annex). These resolutions result from comments of the LegCo Secretariat during the negative vetting process and seek to further improve the clarity of the Rules such as by introducing or revising definitions of certain terms and achieve consistency in the terminology used in the Rules.

The two sets of Rules (as amended by the resolutions mentioned above) will come into operation on 1 January 2007.

Yours faithfully,

Simon Topping
Executive Director (Banking Policy)