Banking (Capital) (Amendment) Rules 2023 - Questions and Answers

Banking Policy Department Our Ref: B1/15C B9/75C S4/3C 20 February 2024 The Chief Executive All Authorized Institutions Dear Sir/Madam, Banking (Capital) (Amendment) Rules 2023 - Questions and Answers (“Q&As”) As mentioned during previous consultations, it is our intention to release supplementary guidance in the form of Q&As to the industry in order to facilitate consistent application of the Banking (Capital) Rules (“BCR”) as amended by the Banking (Capital) (Amendment) Rules 2023 (“BCAR”). Enclosed is a set of Q&As on the capital treatments of IPO financing and exposures to qualifying central counterparties (“QCCPs”) in relation to Swap Connect. This set of Q&As incorporates the explanatory note for IPO financing published earlier for consultation in May 20231 , and the Annex to the circular on Swap Connect issued in May 20232 (with modifications to reflect the update to the BCR in relation to the calculation of hypothetical capital requirements by QCCPs). We envisage that the issuance of Q&As will be a continuing process, and the next set to follow will focus on the revised credit risk framework under the Basel III final reform package to address common interpretative issues raised in previous consultations with the industry on the BCAR. 1 See page 65 of the consultation paper issued on 31 May 2023: https://www.hkma.gov.hk/media/eng/regulatory-resources/consultations/Annex_1_proposed_amendments￾credit_risk_framework_and_output_floor_(20230531).pdf 2 https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2023/20230508e1a1.pdf

2 For ease of access, the Q&As will be maintained on the HKMA's website (https://www.hkma.gov.hk/eng/key-functions/banking/banking-legislation￾policies-and-standards-implementation/capital/). Yours faithfully, Donald Chen Executive Director (Banking Policy) Encl cc: The Chairperson, The Hong Kong Association of Banks The Chairperson, The DTC Association FSTB (Attn: Mr Justin To)