Basel III implementation assessments of Hong Kong SAR and Mexico as well as follow-up reports published by the Basel Committee
16 March 2015
Today the Basel Committee on Banking Supervision published reports assessing the implementation of the Basel risk-based capital framework and the liquidity coverage ratio (LCR) for Hong Kong SAR and Mexico. These form part of a series of reports on Basel Committee members' implementation of Basel standards under the Committee's Regulatory Consistency Assessment Programme (RCAP). A key component of the RCAP is to assess the consistency and completeness of a jurisdiction's adopted standards and the significance of any deviations from the regulatory framework. For the first time, the assessments now also cover the regulatory implementation of the LCR standards. The RCAP does not take account of a jurisdiction's bank supervision practices nor do they evaluate the adequacy of regulatory capital for individual banks or a banking system as a whole.
Overall, the assessment outcomes for both Hong Kong SAR and Mexico are positive and reflect various amendments to the risk-based capital and LCR rules undertaken by the authorities during the assessment. The Basel Committee noted that several aspects of the domestic rules in both countries are more rigorous than required under the Basel framework.
Hong Kong SAR
Overall, the national implementation of the risk-based capital standards is found to be "compliant" with the standards prescribed under the Basel framework. Twelve out of 13 components are assessed as "compliant", while one component, Pillar 3, is determined to be "largely compliant" with the Basel standards. The advanced measurement approach for operational risk has not been implemented in Hong Kong SAR and was therefore not part of the assessment. For the LCR, Hong Kong SAR is graded overall as "compliant". The LCR and LCR disclosure standard subcomponents are also assessed as compliant. The LCR assessment report provides further qualitative information regarding the implementation of the Committee's Principles for sound liquidity risk management and the monitoring tools for liquidity risk.
In carrying out this review, the Committee's assessment team held discussions with senior officials and technical staff of the Hong Kong Monetary Authority. The team also met with a select group of Hong Kong banks.
Overall, the implementation of risk-based capital standards is found to be "compliant" with the Basel standards. Twelve out of 14 components are assessed as "compliant", while the countercyclical buffer and Pillar 3 are considered "largely compliant". Mexico is also assessed as compliant regarding the regulatory implementation of the LCR, including for the LCR and LCR disclosure requirements subcomponents.
In carrying out this review, the Committee's assessment team held discussions with senior officials and technical staff of the Comisión Nacional Bancaria y de Valores and the Bank of Mexico. The team also met with a select group of Mexican banks.
Post-assessment follow-up actions
In addition to the RCAP assessment reports, today the Committee also published overviews of post-assessment follow-up actions by Brazil, China, Japan, Singapore and Switzerland. These five jurisdictions were assessed in 2012 and 2013 for their regulatory implementation of the risk-based capital standards. The follow-up reports summarise where the jurisdictions have taken, or plan to take, further actions to address findings raised in the RCAP assessments. The follow-up reports are based on self-reporting and have not been evaluated by the Basel Committee. The next post-RCAP monitoring report will be published in 2016 and will cover jurisdictions that were assessed in 2014.
Notes to editors
The Basel Committee on Banking Supervision consists of senior representatives of bank supervisory authorities and central banks. Member countries include Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, Spain, South Africa, Sweden, Switzerland, Turkey, the United Kingdom and the United States.
The RCAP is a central element of the Committee's continuing efforts to promote timely adoption of its standards and to monitor its members' full and consistent compliance with the Basel framework. The RCAP also helps member jurisdictions identify deviations from the Basel framework, weigh the materiality of any deviations and undertake necessary reforms. Based on the findings of these assessments, many assessed jurisdictions have already amended their regulations to align them more closely with the Basel framework, thereby helping to promote global financial stability and a level playing field for internationally active banks.
The Basel Committee has previously published jurisdictional assessments of Australia, Brazil, Canada, China, the European Union, Japan, Singapore, Switzerland and the United States.