The Implementation of Basel III Final Reform Package

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Authored by: Simon Deane and Kelly Poon

Taking into account views from the industry about competing priorities and resource constraints amid challenges associated with the Covid-19 pandemic, the HKMA issued a circular to notify AIs of the adjustments to its policy intent for implementing the revised capital standards under the Basel III final reform package (the “package”) on 25 November 2022.

The implementation timeline will be deferred as follows, to allow more time for the industry to prepare for the necessary system changes for the adoption and the regulatory data reporting standards:

(i) the implementation date of those standards associated with credit risk, operational risk, the output floor and the leverage ratio will be adjusted from 1 July 2023 to a date no earlier than 1 January 2024; and

(ii) the new standards for market risk and CVA risk will take full effect on a date no earlier than 1 January 2024, while the reporting-only period for these two standards will be shifted from 1 July 2023 to 1 January 2024.

To align more closely with the Basel requirements, the HKMA has also incorporated adjustments to its policy proposals, which include (1) for the output floor phase-in arrangement to follow more closely that of the package, having regard to the arrangements adopted by other major jurisdictions; and (2) for the minimum LTV-based risk-weight of residential real estate exposures under the revised standardised approach to follow that of the package.

To access a full copy of the circular, please press here.

Key Contacts

Simon Deane

Consultant | Banking and Finance

Email or call +852 2825 9209