Basel Committee Standards – Consolidated and enhanced framework for Pillar 3 disclosure requirements

Banking Policy Department Our Ref.: B1/15C CB/POL/4/5/34 3 April 2017 The Chief Executive All Authorized Institutions Dear Sir/Madam, Basel Committee Standards – Consolidated and enhanced framework for Pillar 3 disclosure requirements As you may be aware, the Basel Committee on Banking Supervision (“BCBS”) issued a standard on Pillar 3 disclosure requirements – consolidated and enhanced framework1 on 29 March 2017 (“March 2017 package”). The March 2017 package is the outcome of the second phase of the BCBS review of the Pillar 3 disclosure framework, which builds on the Revised Pillar 3 disclosure requirements2 published by the BCBS in January 2015. Seeking to promote market discipline through enhanced disclosure of banks, the March 2017 package covers three main elements: (i) consolidation of all existing BCBS disclosure requirements into the Pillar 3 framework; (ii) two new enhancements to the Pillar 3 framework (i.e. the introduction of a “dashboard” of a bank’s key prudential metrics, and a new disclosure template on prudential valuation adjustments); and (iii) updates to reflect ongoing reforms to the regulatory policy framework, such as the total loss-absorbing capacity (TLAC) regime for globally systemically important banks issued by the Financial Stability Board in November 2015 and the revised market risk framework issued by the 1 Please see http://www.bis.org/bcbs/publ/d400.pdf 2 These disclosure requirements were already implemented in Hong Kong with the Banking (Disclosure) (Amendment) Rules 2016 taking effect from 31 March 2017.

• 2 - BCBS in January 2016. According to the BCBS timeline, the implementation dates for the above disclosure requirements will generally be either end-2017 (where the associated policy frameworks have already taken effect), or some specified dates within the next two years depending on the effective dates of their associated policy reforms. The HKMA will consult the industry later this year on its proposed approach to enhancing the local disclosure regime to reflect the March 2017 package. In the meantime, locally incorporated authorized institutions (to which the March 2017 package will be applicable) are strongly recommended to study the relevant disclosure requirements and consider any system changes that are necessary for their implementation. Should you have any questions relating to this letter, please feel free to contact Mr Richard Chu at 2878-8276 or Miss Theresa Kwan at 2878-1093. Yours faithfully, Daryl Ho Executive Director (Banking Policy) c.c. The Chairperson, The Hong Kong Association of Banks The Chairman, The DTC Association FSTB (Attn: Ms Eureka Cheung)