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Hong Kong Implements First Phase of Basel III

by Mary Swire, LawAndTax-News.com, Hong Kong

23 October 2012


Hong Kong gazetted the Banking (Capital) (Amendment) Rules 2012 on October 19 to prescribe a set of revised capital requirements for locally-incorporated authorized financial institutions, in order to implement the first phase of the Basel III requirements.

Basel III is the banking regulatory reform package released in December 2010 by the Basel Committee on Banking Supervision, and designed to increase the level, quality and transparency of banks' capital base, while extending 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 - a Common Equity Tier 1 capital ratio of at least 4.5% and a Tier 1 capital ratio of at least 6% (both to be phased in from January 1, 2013, to January 1, 2015), as well as a total capital ratio of at least 8% 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 added that “local authorized institutions are generally well capitalized with an average capital adequacy ratio of 15.9% 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."

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TAGS: compliance | investment | business | law | banking | offshore | legislation | offshore banking | Hong Kong | standards | legislation amendments

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