Management Summary
- Purpose / Background: The HKMA is reviewing footnote 27 of SPM module CR-G-14 (“Non-centrally Cleared OTC Derivatives Transactions – Margin and Other Risk Mitigation Standards”) to update the list of "deemed comparable" jurisdictions, which currently relies on an outdated WGMR reference.
- One-line conclusion: The HKMA proposes replacing the current "WGMR member" criteria with "BCBS member" jurisdictions to simplify and standardize the comparability assessment for margin requirements.
- Key Changes:
- Shift from WGMR member jurisdictions to BCBS member jurisdictions as the benchmark for comparability.
- Delegation of monitoring requirements to the BIS website (BCBS membership) and the BCBS Basel III implementation dashboard.
- Acknowledgment that standards are deemed comparable effective from the date of the jurisdiction's implementation.
- Key Dates / Deadlines:
- Industry comments due to the HKMA: 30 June 2026.
- Future formal revision: Expected in H2 2026.
- Applicability / Impact scope: All Authorized Institutions (AIs) involved in non-centrally cleared OTC derivatives transactions.
- Recommended management actions:
- Review the proposal to shift to BCBS membership as the basis for comparability.
- Assess internal impact on OTC derivatives margin calculation frameworks and existing cross-border compliance documentation.
- Provide formal feedback via the DTCA by 30 June 2026.
- Monitor the upcoming industry consultation on the full SPM module update in H2 2026.
Detailed Summary
1) Document overview
This letter outlines the HKMA’s proposal to amend footnote 27 in paragraph 2.3.2 of the SPM module CR-G-14. The purpose is to modernize the definition of "deemed comparable jurisdictions" to facilitate better alignment with international standards and current Basel Committee on Banking Supervision (BCBS) membership.
2) Main requirements
- AIs must refer to BCBS member jurisdictions to determine if margin and risk mitigation standards are comparable.
- AIs are expected to utilize official BIS resources (BCBS membership list and Basel III implementation dashboard) to track the implementation status of margin requirements in relevant jurisdictions.
- Comparable standards are deemed to apply from the date of their entry into force in the respective BCBS member jurisdiction.
3) Key changes
- Criteria Shift: Transitioning from the previous WGMR member list to the BCBS membership list.
- Dynamic Monitoring: Moving away from a static list within the SPM footnote toward a reliance on external, up-to-date BIS/BCBS dashboards.
4) Important dates & transition
- 30 June 2026: Deadline for the DTC Association to submit industry comments to the HKMA.
- H2 2026: Scheduled window for the HKMA to issue a broader revised version of the SPM module for formal industry consultation.
5) Impact and risks
- Operational: AIs will need to update internal policy manuals that reference the current list of comparable jurisdictions.
- Compliance: Reduced risk of relying on outdated jurisdictional lists, though AIs must maintain updated records of when specific jurisdictions implemented their respective Basel III standards.
6) Compliance action checklist
- Verify if current OTC derivatives counterparties are in jurisdictions that would be impacted by the switch from WGMR to BCBS criteria.
- Prepare internal summary/comments for submission to the DTCA regarding any potential conflicts this change may introduce.
- Update internal compliance monitoring tools to track the BIS website for BCBS implementation status.
7) Appendices/attachments summary
- No formal appendices were attached to this document. The letter serves as an industry notification for consultation regarding potential updates to the SPM CR-G-14 regulatory framework.