NSFR implementation in Hong Kong: practice makes perfect

As banks in Hong Kong gear up for the 2018 implementation of the Basel III net stable funding ratio (NSFR), the Hong Kong Monetary Authority (HKMA) has launched another study into its likely impacts that should both reassure the local financial sector and also serve as a reminder of the need for careful preparation, not least on the technology front. Here Amita Cheung, Regulatory Reporting Manager for Wolters Kluwer’s Finance, Risk & Reporting business, examines the challenges ahead.

The HKMA’s quantitative impact study (QIS) on the modified net stable funding ratio (MNSFR) is the third of its kind and part of a broader, multi-year consultation exercise on NSFR’s local implementation. While previous studies targeted so-called ‘category 1’ institutions - generally larger, internationally active banks - that will be subject to the full force of NSFR requirements, this study will gauge the ability of smaller category 2 banks to adhere to MNSFR, essentially a less stringent ‘NSFR light.’