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Authored by: Simon Deane and Chris Wong
The HKMA has made several updates to three modules of his Supervisory Policy Manual (“SPM”).
(i) SPM module “IC-7 – The Sharing and Use of Commercial Credit Data through a Credit Reference Agency” was updated on 16 November 2022. The minor amendments dealt with the introduction of the Commercial Data Interchange (“CDI”). Launched on 24 October 2022, the CDI is a key initiative of the HKMA’s Fintech 2025 strategy, and introduces new infrastructure for the sharing of data about SMEs held by public and private data providers to financial institutions in a secure and efficient manner. Initial data providers include Dun and Bradstreet (the commercial credit reference agency in Hong Kong) and Tradelink Electronic Commerce (an import-export-related platform for businesses).
Since the commercial credit reference agency’s database is now accessible via the CDI, the amendments to IC-7 set out the HKMA’s regulatory expectations for this access, including safeguards to protect the security of the data disclosed or obtained, proper utilization of information, etc.
(ii) SPM module “CG-3 – Code of Conduct” was updated on 9 December 2022. Several changes and updates were made, including:-
a. Changes to conflict of interest policy requirements – stronger requirements are now in place to require staff of AIs to consider conflict of interest situations arising between the interests of the AI and the private interests of the staff member (which include the interests of relatives, personal friends or any other parties with whom the staff member has personal ties), including circumstances where the staff member is making private investments or taking up outside employment. Staff members are required to make a declaration if they become aware that they or their close family members have performed any role or taken any action that poses a risk of the staff member having a conflict of interest.
b. Expanded references to the Prevention of Bribery Ordinance (Cap. 201), including in relation to sections 8 and 9 of the ordinance, relating to bribery of public servants and corrupt transactions.
c. Updating requirements and guidelines in relation to internal control systems enforcing the Code of Conduct of AIs, including an expanded oversight role for senior management and incident reporting.
Minor amendments were also made to allow the use of group codes of conduct where an AI is incorporated outside of Hong Kong or is a part of an international banking group.
It should be noted that AIs are required to review their existing Codes of Conduct to ensure they comply with the changes, and to make all necessary changes by 1 July 2023.
(iii) SPM module “SA-1 – Risk-based Supervisory Approach” was updated on 23 December 2022. Minor changes were made – on top of the existing eight inherent risks identified by the HKMA as a part of his risk-based supervisory approach (credit, market, interest rate, liquidity, operational, legal, reputation, and strategic), the HKMA has added emerging risks to account for new risks that may emerge now and in the future. In particular, the addition of emerging risks was to account for climate risk, an area which the HKMA has become focused on since his introduction of SPM module “GS-1 – Climate Risk Management” at the end of 2021.
The three circulars can be accessed below:-
Supervisory Policy Manual (“SPM”): Module IC-7 “The Sharing and Use of Commercial Credit Data through a Credit Reference Agency” (16 November 2022)
Revised SPM CG-3 “Code of Conduct” (9 December 2022)
Supervisory Policy Manual (SPM): Revised Module SA-1 on “Risk-based Supervisory Approach” (23 December 2022)
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