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.’

The new Basel IRRBB: regulatory and internal consequences

Last April, the Basel Committee issued its new standard on the interest rate risk in the banking book presenting a new standardised framework. This new standard is to be implemented by 2018. Here Xavier Dubois, Senior Risk & Finance Specialist for Wolters Kluwer’s Finance, Risk and Reporting business looks at some aspects of the standardised framework, how it could be implemented in Europe and its interest for the bank governing bodies.

In April, the Basel Committee on Banking Supervision issued standards for Interest Rate Risk in the Banking Book (IRRBB). The standards revise the Committee's 2004 Principles for the management and supervision of interest rate risk, which set out supervisory expectations for banks' identification, measurement, monitoring and control of IRRBB as well as its supervision.

In a nutshell the new standard realises a significant improvement in the management of interest rate risk in the banking book. Not only does it provide a standardised measurement closer to economic reality, and thus more useful for the bank management, particularly in this time of low interest rates, but it also provides standardisation that increases transparency, not only from banks, but also from supervisors. Banks will have to adopt this new framework and should take this opportunity to move towards a technologically sound and solid risk framework with automation and integration, for supervision and, last but not least, for the governing body.

Embracing RegTech: Asia Pacific adapts to mounting reporting requirements

Just as global regimes such as the Basel III net stable funding ratio (NSFR) and International Financial Reporting Standard (IFRS) 9 are being rolled out, Asia Pacific’s regional regulators are stepping up the pressure on banks by intensifying reporting requirements and moving more aggressively to address governance failures.

Thankfully, at the same time, emerging technologies, such as RegTech, and business models are equipping institutions with the strategies and capabilities needed to address escalating regulatory reporting requirements, which have become a region-wide reality. For example, the Monetary Authority of Singapore is completely overhauling the key financial position report, MAS 610, for the first time in years to glean more data points and details from banks. The changes will impact all supporting forms and require multiple new attributes, calculations and aggregations.

A vision of the future - and it has to be near term if you want to compete

Immediately following the 2008 crash we should have been at the peak of regulatory change. Indeed, there were some very rapid responses, such as the 2009/2010 UK liquidity regime.  The mountain of reform needed was far greater than initially understood, ranging from structural change to Basel III.

As a result of the size of the change needed, it has been slower. Bank business model changes have arisen as a result of the redefinition of capital, the meaning of high quality and, of course liquidity. In addition, the amount of capital reserves and liquidity have increased.  But now that Basel III is largely in place, is the avalanche over?