Lombard Risk - Regulation in HONG KONG

7/31/2019 Lombard Risk - Regulation in HONG KONG

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Regulatory compliance

HONG KONG

Currency Hong Kong Dollars (HKD)

Language Cantonese 90.8% | English 2.8% |

Others 6.4% (2006)

Population 7,153,519 (July 2011)

GDP Nominal $243.302 billion (2011)Purchase power parity $355.6 billion (2011)

Real growth rate 5% (2011)

Government Special Administrative Region of the

People's Republic of China

Legislature Legislative Council (LegCo)

Geographical area 426 miles | Eastern Asia, bordering

South China Sea and China

Economy Hong Kong is a prime example of

laissez-faire capitalism, with ample

economic license. A major capitalist

service economy, it is notable for a

low tax rate and free trade.

Hong Kongers enjoy one of the

highest income per capita in the

world. These characteristics make it

highly dependent on international

trade and finance. GDP composition

by sector: Agriculture 0.1% | Industry

6.8% | Services 93.2% (2011).

Corruption perception

rating / worldwide

ranking

8.4 [10 good 0 bad]/ 12th

Points of interest Literally meaning Fragrant Harbour,

Hong Kong has secured a place as one

of the most important metropolises

in the world, alongside New York and

London, prompting TIME magazines

coinage Nylonkong, representing a

global network that facilitates the

global economy.

Scarcity of space led to denser

constructions (now the world's most

vertical city), and sophisticated

transport systems (public commuting

rate > 90%).

Economic freedom, financial and

economic competitiveness, quality of

life, corruption perception, and

human development index all rankhighly. The political system is

governed by a high degree of

autonomy.

has been

established in

Hong Kong for over a decade providing

focused professional services around

installation of regulatory products for

financial institutions in this jurisdiction.

We constantly monitor upcoming

regulatory changes being imposed in

Hong Kong, assessing the impact and

working proactively with our clients.

Lombard Risk REPORTER for regulatory

compliance

Lombard Risk business and regulatory

compliance experts explain:

regulatory environment

in Hong Kong

Banks regulators

Hong Kongs Financial Institutions are regulated by the Hong Kong

Monetary Authority (HKMA), The Securities and Futures

Commission (SFC) and Hong Kong Deposit Protection Board (DPB).

TheHong Kong Monetary Authoritys (HKMA) main

role is to ensure the stability of the HK$ and it is the

central banking institution of Hong Kong. It promotes

efficiency, integrity and development of the financial

sector by means of the stability pact of 1995, with

central banks of Malaysia, Thailand, Indonesia and

Australia to engage in repurchase agreements,

providing liquidity to all involved. It reports directly to

the Financial Secretary of Hong Kong.The Securities and Futures Commission (SFC) is an

independent body which regulates the securities and

futures market in Hong Kong. It is responsible for

maintaining an orderly securities and futures market;

to protect investors; and to promote Hong Kong as a

key international financial centre. Although

considered to be a branch of the government, it is a

self-regulated organisation (SRO).

The Hong Kong Deposit Protection Board (DPB) is an

independent body charged with the responsibility of

maintaining a Deposit Protection Scheme (DPS) in

Hong Kong. It is a key part of the financial safety net

in Hong Kong; provides a measure of protection todepositors and contributes to the stability of Hong

Kongs financial sector.


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Reports are submitted electronically including via XBRL. Hong

Kong is well on the way to implementing Basel III; there has been

considerable industry consultation on regulation and a further

draft text of rules is scheduled for the end of 2012 and

implementation by January 2013. There has also been a bill passed

and published by the legislative council for the creation of

rulemaking powers for the implementation of Basel III.

Investment firms regulators

Hong Kongs investment firms are regulated by the Securities and

Futures Commission (SFC). Its role is to maintain order and

protect investors by: setting and enforcing market regulations;

licensing and supervising brokers, investment advisers, fund

managers; authorising documents and investment products to be

offered to public; and educating investors on markets and risks.

Hong Kongs position as a gateway to Chinas booming economy,

coupled with its impressive labour force, open economy and its

behaviour towards foreign investors mean it is a top destination

for incoming investment. This dependency on foreign investment

meant that its economy contracted greatly during the financial

crisis.

Insurance firms regulators

Hong Kongs insurance firms are regulated by the Office of the

Commissioner of Insurance (OCI). Its role is to protect the interests

of policyholders, regulate insurers and insurance intermediaries and

promote the general stability of the insurance industry. Hong

Kongs current regulation on insurance is unsophisticated - capital

requirements are rule based and not risk adjusted. There is also low

transparency on disclosure. The OCI is monitoring Solvency II and is

considering a Solvency II equivalent, much like China.

GDP Growth (%) of Hong Kong and comparisons

Bank composition

Main regulator

Current

chairman

Norman Chan

Previous

chairman

Joseph Yam (2009)

Address Two International Finance Centre

(55th floor, Part of 56th Floor, 77th

Floor 88th Floor, Central District,

Hong Kong

Website www.hkma.gov.hk/

The HKMAwas established in April 1993 via the consolidation of

the Office of the Exchange Fund and the Office of theCommissioner of Banking. The HKMA is the government authority

in Hong Kong responsible for maintaining monetary and banking

stability. Its main functions are:

Maintaining currency stability within the framework of the

Linked Exchange Rate system

Promoting the stability and integrity of the financial system,

including the banking system

Helping to maintain Hong Kong's status as an international

financial centre, including the maintenance and development

of Hong Kong's financial infrastructure

Managing the Exchange Fund

The HKMA requires some complex reports, such as:

Large exposure returns which require firms to collect both

direct and indirect exposure by bank, non-bank and connected

parties daily; accruing the daily group exposure data and

finding which groups have the largest ten exposures during

each quarter

Liquidity reporting returns which require gathering

information on and computing institutions liquidity ratio and

funding sources; identifying all liquefiable assets which refers

to assets mature or readily realisable within one month; and

qualifying liabilities which refers to liabilities maturing and

likely to crystallise within one month

Maturity profile returns which require accumulating

information on the maturity profile of assets and liabilities of

authorised institutions; splitting the assets and liabilities into

different product nature; identifying the actual or projected

cash flow and slotted into different maturity bucket according

to the actual or estimated maturity date; and ensuring the

total outstanding reported for each line items tied back to the

balance sheet

-4-2

0

2

4

6

8

10

12

14

16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

HK

China

Singapore

World

150

19

26

67

Bank composition (262)

Licensed banks

Restricted License banks

Deposit-taking companies

Local representative offices
http://www.hkma.gov.hk/http://www.hkma.gov.hk/http://www.hkma.gov.hk/


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Example bank returns required by the HKMA

Return Name

I HK$ Interbank Transactions Return

W Mandatory Provident Fund Related Activities

E Large Exposures

F Foreign Currency Position

M Maturity Profile Interest Rate Risk

N Market Risk Exposures

O Combined Assets and Liabilities

P Profit & Loss Account Return

R Capital Adequacy Ratio

S Assets & Liabilities Return - Hong Kong Office

V Assets and Liabilities

X Return of External Positions

J Interest Rate Risk

U Securities Related Activities Return

E-CON Large Exposures

Z Liquidity Stress Testing

Y Insurance Related ActivitiesK Liquidity Position Interest Rate Risk

L Loans and Advances Summary Interest Rate Risk

J1 Interest Rate Risk (Supplemental info)

TA Bank Ordnance

TB Bank Ordnance

G Monthly Return of Renminbi Business Activities

List of bank returns required by the DBP

DPB Return of Relevant Deposits

Lombard Risks REPORTER keeps pace with regulatory requirements,

automating end-to-end from data collection to electronic output, so

giving you the ideal solution for all automated regulatory reporting

requirements.

With full support for key supervisory computations and powerful

workflow, status dashboards, graphical presentation of trends and

validations, REPORTER delivers huge savings in time and effort,

reduces operational risk, and delivers significantly improved

management information and management oversight.

Basel III, EBA / European common reporting COREP

and FINREP and transaction reporting, as well asSolvency II for the insurance marketplace

Regulatory computation from raw data with

comprehensive Capital, Liquidity and Large Exposures

engines as well as detailed statistical computations

Automation of regulator-mandated and client-defined

validation rules

Support for all transmission requirements including

XBRL, XML and proprietary formats

Powerful data management functionality overcomes

The Data Problem: fully automated cleansing,

consolidation and normalisation of multiple data

sources irrespective of data format

Automated Straight-Through-Processing (STP) enablesexception-based management, ensuring regulatory

reporting is automated unless manual intervention is

needed

Workflow automation job-streams your production

process enabling sign-off dependencies to be

achieved under strict timetable conditions

Full security for all processes

Trends and Variance analysis provides automated

drill-down comparison tools, significantly accelerating

review, reconciliation and sign-off. Regulators

enquiries are anticipated and easily answered

For more information on any of these topics visit

www.lombardrisk.comand/or email

[email protected]

August 2012
http://www.lombardrisk.com/products/regulatory-compliance/reporter/eba-common-reporting-corephttp://www.lombardrisk.com/products/regulatory-compliance/reporter/xbrlhttp://www.lombardrisk.com/http://www.lombardrisk.com/http://www.lombardrisk.com/http://www.lombardrisk.com/products/regulatory-compliance/reporter/xbrlhttp://www.lombardrisk.com/products/regulatory-compliance/reporter/eba-common-reporting-corep

Lombard Risk - Regulation in HONG KONG

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