The following is issued on behalf of the Hong Kong Monetary Authority:
 
     The Hong Kong Monetary Authority (HKMA) today (December 24) published the December 2019 issue of its Quarterly Bulletin. 　    
     This issue of Quarterly Bulletin carries a feature article entitled "The Foreign Exchange and Derivatives Markets in Hong Kong" and a regular article on the banking environment. 
      
     The Quarterly Bulletin can be viewed on and downloaded from the HKMA website.

The following is issued on behalf of the Hong Kong Monetary Authority:
 
     The Hong Kong Monetary Authority (HKMA) has completed its annual assessment of the list of Domestic Systemically Important Authorized Institutions (D-SIBs). Based on the assessment results, the list of authorised institutions designated as D-SIBs remains unchanged compared to the list of D-SIBs published by the HKMA on December 21, 2018. The latest list of D-SIBs is shown in the Annex.
 
     Under the D-SIB framework, each of the authorised institutions designated as a D-SIB will be required to include a Higher Loss Absorbency (HLA) requirement into the calculation of their regulatory capital buffers within a period of 12 months after the formal notification of its designation. The HLA requirement applicable to a D-SIB (expressed as a ratio of an authorised institution's Common Equity Tier 1 capital to its risk-weighted assets as calculated under the Banking (Capital) Rules) ranges between 1 per cent and 3.5 per cent (depending on the assessed level of the D-SIB's systemic importance). 
 
     Compared with the list of D-SIBs published in December 2018, the HLA requirement for one authorised institution (Standard Chartered Bank (Hong Kong) Limited) has increased from 1 per cent to 1.5 per cent and that for another authorised institution (Hang Seng Bank Limited) has decreased from 1.5 per cent to 1 per cent.
 
     Further details about the decision can be found on the HKMA website (Systemically Important Authorized Institutions (SIBs)).
 
Background

(1) D-SIB framework in Hong Kong

     The Banking (Capital) Rules and the HKMA's regulatory framework for D-SIBs follow the provisions in "A framework for dealing with domestic systemically important banks" issued by the Basel Committee in October 2012, by enabling the Monetary Authority (i) to designate an authorised institution as a D-SIB if the Monetary Authority considers the authorised institution to be of systemic importance in the context of the Hong Kong banking and financial system and (ii) to require an authorised institution designated as a D-SIB to be subject to an HLA capital buffer.
 
     The rationale for imposing an HLA requirement on D-SIBs is to reduce any probability of them becoming non-viable. This is considered both prudent and justified in view of the greater impact that they could have, in the unlikely event of their failure, on the domestic financial system and the local economy more broadly. 
 
(2) HLA requirement for authorised institutions designated as D-SIBs

     The Monetary Authority is empowered under sections 3U and 3V of the Banking (Capital) Rules to designate D-SIBs and to determine an HLA requirement for each of these D-SIBs by reference to the degree of domestic systemic importance which the Monetary Authority assesses them to bear. To achieve this aim, the HKMA's regulatory framework for D-SIBs provides for authorised institutions designated as D-SIBs to be allocated to different HLA "buckets". This differentiated approach reflects the diversified nature and varying degrees of systemic importance of authorised institutions in Hong Kong.
 
     The designated D-SIBs must apply the HLA in the calculation of their regulatory capital buffers within 12 months of the formal notification of their designation. There are five HLA buckets in total ranging from 1 per cent to 3.5 per cent. While only the first four buckets (i.e. from 1 per cent to 2.5 per cent) have been populated so far, the framework includes an empty 3.5 per cent bucket to encourage D-SIBs to refrain from becoming even more systemically important.  
 
     The HLA applied to a D-SIB serves (together with the Countercyclical Capital Buffer) as an extension of the Basel III Capital Conservation Buffer. Accordingly, if and when a D-SIB's CET1 capital ratio falls within the extended buffer range, the D-SIB will be subject to restrictions on the discretionary distributions it may make. The effect of this is that D-SIBs will be required to retain earnings in order to bolster their regulatory capital.

     The Government will introduce the Statute Law (Miscellaneous Provisions) Bill 2019 in the Legislative Council (LegCo) to propose a number of miscellaneous amendments to various Ordinances for the purpose of updating and further improving the relevant legislation.

     A spokesman for the Department of Justice said today (December 24) that the Bill will be gazetted on December 27, and will then be introduced to the LegCo on January 15, 2020.

     The major proposed amendments include:

(1) To amend the High Court Ordinance (HCO) (Cap. 4)

     To ensure that all cases are handled as expeditiously as is reasonably practicable, the Judiciary proposes the following amendments to the HCO:

(a) To amend section 34B(4) of the HCO to extend the use of a two-Judge bench of the Court of Appeal (CA) (i.e. two-Judge CA) to determine:

(i) applications for leave to appeal to the Court of Final Appeal against the decisions made by the CA consisting of less than three Justices of Appeal; and

(ii) appeals against the Court of First Instance's decisions to refuse to grant leave to apply for judicial review or to grant such leave on terms.

(b) To amend section 34B(5) of the HCO so that when the two-Judge CA in various types of proceedings cannot reach a unanimous decision, in addition to a party being allowed to apply to re-argue the case before a three-Judge CA, the Court may also make such an order on its own motion.

(c) To amend sections 4(2) and 5(2) of the HCO to clarify that an additional judge in the Court of First Instance or the CA has the power to dispose of cases on paper without physically "sitting" in court.

(2) To amend the Interpretation and General Clauses Ordinance (Cap. 1) so that references made to an Ordinance may be made according to the title, short title, citation, number or chapter number used in the verified copies of the Ordinance in addition to those used in copies of the Ordinance printed by the Government Printer.

(3) To amend the Chinese text of certain defence provisions containing the phrase "could not with reasonable diligence" to make it explicit that it refers to an objective test based on a hypothetical situation.

(4) To amend other miscellaneous and technical amendments, for example, to update the references to the titles of certain Ordinances, achieve consistency in certain expressions and correct other minor errors.

     The effective exchange rate index for the Hong Kong dollar on Tuesday, December 24, 2019 is 106.5 (same as yesterday's index).

     It is expected that many people will participate in celebratory activities on Christmas Eve today (December 24). Police appeal to the public to stay tuned to the latest traffic and road closure arrangements. Kowloon Park Drive in Tsim Sha Tsui will be closed at 5pm today.
      
     Police will closely monitor the situation in various districts. In case of emergency and mass gatherings, Police will conduct timely assessment of risks posed to public safety and public order, and will make respective traffic or road closure arrangements. Members of the public are advised to stay tuned to the latest announcements from Police and pay attention to possible changes of public transport services.