Hong Kong: Hong Kong: New HKMA Guidelines

In the past few months the HKMA issued a series of new guidelines applying to authorised institutions operating or incorporated in Hong Kong. A brief digest of some of these guidelines follows.

In November 2002 the HKMA issued a new version of its FD-1 "Financial Disclosure by Locally Incorporated Authorised Institutions".

This replaces the earlier version, dated 2 November 2001, of the statutory guideline. It sets out minimum disclosure standards which the HKMA expects authorised institutions incorporated in Hong Kong to comply in respect of information to be included in their annual accounts. The guideline does not apply to smaller restricted licensed banks and deposit-taking companies.

Changes to the earlier version mainly relate to the breakdown of figures required for customer deposits, separate disclosure of gross fees and income from commission and expenses, and information on repossessed assets. Affected institutions will adopt the guideline in relation to financial statements for periods ending on or after 31 December 2002.

Also issued in November were FD-2 "Interim Financial Disclosure by Locally Incorporated Authorised Institutions" and FD-3 "Financial Disclosure by Overseas Incorporated Authorised Institutions". The respective 2001 versions have been superseded.

On 2 December 2002 the HKMA issued a new guideline, titled "Business Continuity Planning", which is one of the modules under the HKMA’s Supervisory Policy Manual.

This is a new guideline applying to all authorised institutions regulated by the HKMA. It sets down requirements for advance planning in relation to emergency or disaster situations. Spurred by the 9-11 event, the guideline attempts to focus the mind of banking professionals on continuity problems which may arise should unforeseen circumstances arise with potentially catastrophic consequences.

Guidance is given on various areas of disaster planning, from identification of key risks, organisation of crisis management teams, to the formulation of recovery procedures. Areas covered include what key components need to be included in business continuity planning, the business resumption process, management of records, technological issues, etc. The HKMA also sets out its supervisory approach and the continuing investigations it plans to conduct to ensure compliance with minimum requirements.

© Herbert Smith 2003

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