Regulatory Alerts2020-07-23
Added · Updated
HKMA Guidance on Basel Framework FAQs Regarding Benchmark Rate Reforms
The Hong Kong Monetary Authority issues regulatory guidance to Authorized Institutions on prudential treatments for benchmark rate reforms across capital, market risk, counterparty credit risk, liquidity, and operational risk. The letter clarifies that amendments to capital instruments solely for reform purposes do not trigger reassessment, allows transitional counting of historical price observations for market risk modeling, and permits disregarding transitional illiquidity for collateral eligibility. Additionally, it permits anticipating increased liquidity for replacement instruments in High Quality Liquid Asset assessments and clarifies that operational losses from reform do not qualify for exclusion from operational risk charges.