Hong Kong Banking Regulator Consults on New Securitisation Framework

The Hong Kong Monetary Authority ("HKMA") has published plans for a revised securitisation structure, implementing changes made by the Basel Committee on Banking Supervision to its standards for capital requirements for exposures held on banks' books. 

In a consultation that will run until 17 March 2017, the HKMA laid out its proposed approach for implementing the new framework in time for it to take effect from 1 January 2018, in accordance with the Basel Committee implementation timetable.

After receiving feedback to the consultation, the HKMA said it would refine the proposals and prepare a set of draft amendments to the Banking Capital Rules. These amended rules would then be the subject of a new consultation in the second half of 2017. There would be a further consultation on the proposed text for amending the rules, the HKMA said.

The HKMA said it would follow the revisions made by the Basel Committee in 2014, with a few modifications for national discretion where necessary. The revisions aimed to simplify the existing Basel II securitisation framework, reduce mechanistic reliance on external ratings and enhance the risk sensitivity.

The revised structure covers the calculation of risk-weighted amounts, capital requirements, credit risk transfer and securitisation exposures in the trading book, among others.

The HKMA announced in December 2014 it would implement a revised securitisation framework based on the Basel Committee revisions. The consultation paper is intended to shed more light on the intended regime and grant the industry to respond to the HKMA's proposals.

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North Asia editor for Thomson Reuters Regulatory Intelligence. He is based in Hong Kong.