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The Banking (Capital) (Amendment) Rules 2012 will be gazetted this Friday (October 19) to prescribe a set of revised capital requirements for locally incorporated authorised institutions, in order to implement the first phase of Basel III requirements scheduled to take effect in January 2013.
Basel III is the banking regulatory reform package released in December 2010 by the Basel Committee on Banking Supervision. The new Basel III capital framework is designed to increase the level, quality and transparency of banks' capital base and to extend the risk coverage of the regulatory capital framework.
Under the revised framework for the determination of the regulatory capital base, a bank will need to maintain three capital ratios calculated as a percentage of its risk-weighted assets. These are: a Common Equity Tier 1 capital ratio of at least 4.5 per cent and a Tier 1 capital ratio of at least 6 per cent (both to be phased in from January 1, 2013, to January 1, 2015), as well as a total capital ratio of at least 8 per cent from January 1, 2013.
"The implementation of the Basel III capital requirements will enhance the resilience of Hong Kong's banks and banking system, underpinning Hong Kong's status as a major international banking and financial centre," a spokesman for the Financial Services and the Treasury Bureau said.
A spokesman for the Hong Kong Monetary Authority said, "Local authorised institutions are generally well capitalised with an average capital adequacy ratio of 15.9 per cent as at end June 2012 and thus should be relatively well placed to meet the new requirements. We have consulted the banking industry widely before adopting this first phase of the Basel III capital standards and will continue to consult the industry as we roll out the subsequent phases of the Basel III package."
The Legislative Council enacted the Banking (Amendment) Ordinance 2012 in February 2012 to provide the legal framework for implementation in Hong Kong of the Basel III regulatory capital, liquidity and disclosure standards promulgated by the Basel Committee on Banking Supervision. The Administration will gazette a Commencement Notice this Friday (October 19) to bring into operation certain provisions of the Banking (Amendment) Ordinance 2012 on January 1, 2013, that are necessary for the implementation of the new Basel III capital framework.
Also gazetted is a technical amendment to the Banking (Specification of Multilateral Development Bank) Notice to include the Multilateral Investment Guarantee Agency in the list of "multilateral development banks". At present, authorised institutions' exposures to the listed multilateral development banks are eligible for preferential risk-weighting treatment under the regulatory capital framework.
A package of the above subsidiary legislation will be tabled before the Legislative Council at its sitting of October 24 for negative vetting, with a view to commencement on January 1, 2013.
Ends/Wednesday, October 17, 2012
Issued at HKT 16:00
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