financial services risk and regulation - pwc · the financial services market landscape. in this...

Financial Services Risk and Regulation

Regulatory updates newsletter

May 2019

Regulatory Updates Newsletter — May 2019 PwC · 2

Executive

Summary

SFC Circular on

Recent Inspection

Findings Related to

Client Facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation

Conclusions on Draft

Insurance (Maximum

Number of Authorised

Insurers) Rule

Consultation Conclusions on

Draft Insurance (Financial

and Other Requirements for

Licensed Insurance Broker

Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary

Contents

Executive Summary 3

SFC Circular on Recent inspection Findings Related to Client Facilitation 4

FATF Private Sector Consultative Forum 5

HKMA Consultation on Guidelines on a Sound Remuneration System 6

Mutual Recognition of Funds (MRF) between the Netherlands and Hong Kong 7

Consultation Conclusions on Draft Insurance (Maximum Number of Authorised Insurers) Rule 8

Consultation Conclusions on Draft Insurance (Financial and Other Requirements for Licensed Insurance Broker

Companies) Rules

9

Commencement Date for New Regulatory Regime for Insurance Intermediaries 10

Other Regulatory Updates 11-12

Glossary 13

Emily Lam

Partner

+852 2289 1247

PwC HK FS Risk and

Regulation

“The regulators continued the 2019 trend of

issuing diverse set of regulations ranging from

guidelines on client facilitation to a sound

remuneration system, amongst others. With

this newsletter, we will continue to keep you

up to speed with significant regulatory

developments across the financial services

industry.”


Hong Kong financial services regulators

continue to push the envelope in

creating a robust regulatory ecosystem

for all financial institutions.

For instance, the HKMA granted two

more stored value facility (SVF)

licences in May. These licences take

the total to 15 non-bank SVF licensees,

while three licensed banks are also

operating SVFs. In addition, the HKMA

also granted four more virtual banking

licences in May, taking the total to 8

virtual bank licensees. The licensees

are preparing to launch their operations

later this year. These developments are

bound to have a significant impact on

the financial services market landscape.

In this month’s newsletter, we discuss

the following developments:

• The SFC issued a circular to share

the observations it made during

thematic reviews of client facilitation

as well as its expected standards.

The SFC instructs that client consent

should never be unidirectional,

blanket, implied by the making of

disclosure or obtained after the trade.

• The FATF held its annual Private

Sector Consultative Forum on 6-7

May 2019 in Vienna, Austria. The

Forum discussed latest trends/

priorities of AML/CFT in public and

private sector. They also discussed a

range of other topics such as the

importance of AML/CFT in the

context of combating corruption and

the best practices on beneficial

ownership.

• The HKMA issued a consultation on

Guidelines on a Sound

Remuneration System on 6 May

2019. The aim of the consultation is

to set out the HKMA’s supervisory

expectations about remuneration

practices of AIs.

• Additionally, the SFC and the Dutch

Autoriteit Financiële Markten (AFM)

signed a Memorandum of

Understanding concerning Mutual

Recognition of Covered Funds and

Management Companies and related

cooperation.

• The IA published consultation

conclusions on two sets of rules for

implementation of the new statutory

regulatory regime for insurance

intermediaries - the Insurance

(Maximum Number of Authorised

Insurers) Rules, and the Insurance

(Financial and Other Requirements

for Licensed Insurance Broker

Companies) Rules.

• And finally, the IA has proposed to

take over the regulation of insurance

intermediaries from the three Self-

Regulatory Organisations on 23

September 2019.

For further details on these

developments, please refer to the

following sections in this publication.

Emily Lam

FS Risk and Regulation

+852 2289 1247

[email protected]

Executive Summary

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary


The SFC has identified a number of

conduct issues associated with

client facilitation

The SFC issued this circular on 14 May

to share the observations it made during

thematic reviews of client facilitation as

well as its expected standards.

The standards of conduct and internal

controls the SFC expects of LCs

providing client facilitation services

include:

• Controls, monitoring and

management supervision: Policies

and procedures should be established

which cover the key areas relating to

client facilitation such as client

consent, order visibility, system

access, the accuracy of indications of

interest and position limits.

• Segregation of agency and

facilitation activities: For client

facilitation orders, communications

between agency and client facilitation

traders should be recorded and

monitored on a timely basis.

• Consent and disclosure: As LCs

assume a risk-taking principal position

against clients in client facilitation

activities, the nature of the trades

should be disclosed to clients and

their prior consent obtained so that

they are fully aware of the inherent

conflicts of interest.

• Indications of interest (IOIs): IOIs

should only be disseminated when

they are based on a genuine client or

proprietary intent to trade. IOIs should

provide sufficient details, and controls

and monitoring should be

implemented to ensure they are

accurate and updated in a timely

manner.

From mid-2018, the SFC has reviewed

compliance with the expected standards

in its inspections of selected brokers and

found the following:

• Some traders misrepresented a house

or client facilitation trade as an agency

trade;

• Some traders were silent or not

transparent about whether facilitation

would be involved in a trade;

• Some traders failed to obtain explicit

pre-trade consent from clients when

effecting client facilitation trades;

• Some IOIs were described as natural

although they were not based on a

genuine client intent to trade; and

• Some firms’ policies and procedures

were not clear and could not ensure

compliance with the expected

standards, although they reported that

their client facilitation policies were

reviewed and enhanced in light of the

February 2018 circular. For example,

some of the prescribed in-house

language and written notifications to

clients described the nature of trades

in an ambiguous manner.

Conflicts of interest have long been a

recurring regulatory concern. According

to the SFC, client consent should never

be unidirectional, blanket, implied by the

making of disclosure or obtained after the

trade. More importantly, licensed

individuals, when dealing with clients,

should always act honestly and fairly.

SFC Circular on Recent inspection findings related to client facilitation

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary

Michael Footman

Partner

+852 2289 2747

[email protected].

com


FATF Private Sector Consultative Forum

The FATF held its annual Private

Sector Consultative Forum on 6-7

May 2019 in Vienna, Austria

Over 300 private sector representatives,

from the financial sector, civil society, and

FATF members and observers,

participated in this year’s Forum.

The topics discussed at the Forum were:

• Importance of AML/CFT in the

Context of Combating Corruption:

The session shared the experience of

The Sentry and the US Department of

the Treasury in using a range of

economic tools and sanctions against

corrupt officials with specific emphasis

on the networks they use to launder

the proceeds of corruption.

• Latest Trends/ Priorities of

AML/CFT in Public and Private

Sector: The session discussed the

importance of measuring

“effectiveness” in the context of

implementation of AML/CFT measures

and looked into areas to improve.

• Virtual Assets: The discussions

focused on the mapping of virtual

asset services and business models,

on the measures applicable to virtual

asset transfers (Recommendation 16),

as a follow-up to the public

consultation opened in February 2019,

and on the implementation of specific

FATF Recommendations in a virtual

asset context.

• Digital ID: Participants discussed how

the requirement to use ‘reliable and

independent’ sources for identification

and verification could be interpreted in

the context of digital identity provided

by governments or by the private

sector, including the intersect with

technical digital identity standards and

how these could be interpreted in the

context of a AML/CFT risk

management framework.

• Application of Technologies in the

Context of AML/CFT (Machine

Learning, Data Mining, Artificial

Intelligence): Participants exchanged

views on how public authorities and

private sector firms could make

greater use of technology to manage

financial crime risk, how technology

facilitated customer due diligence,

sanctions screening and transaction

monitoring, and how government

authorities harnessed new

technologies to increase efficiency and

effectiveness in detecting ML/TF.

• Opportunities and Challenges in

Conducting Due Diligence

(Information Sharing, Data

Protection and Privacy): The

session discussed the key factors

related to information sharing that are

critical to effective risk management.

• FATF TF Risk Assessment

Guidance - Non-Profit Sector

Consultation: The Forum discussed

the importance of ongoing

engagement with the sector, including

through the use of multi-stakeholder

working groups to facilitate information

exchange.

• Risk Based Approach on Legal

Profession, Accountants and Trust

and Corporate Service Providers:

The session discussed the draft

Guidance to assist competent

authorities and professionals in the

legal, accountancy and trust and

company service providers sectors in

the application of a RBA to AML/CFT.

• Best Practices on Beneficial

Ownership: The FATF has started a

project to identify the best practices on

beneficial ownership, which aims to

facilitate jurisdictions to implement

effective measures in order to ensure

that legal persons are prevented from

being misused for ML/TF.

HoKee Fu

Partner

+852 2289 2721

[email protected]

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary


HKMA Consultation on Guidelines on a Sound Remuneration System

This module sets out the HKMA’s

supervisory expectations about

remuneration practices of AIs

The HKMA issued a consultation on

Guidelines on a Sound Remuneration

System on 6 May 2019. The aim of the

consultation is:

• to provide guidance to AIs on the key

elements of a sound remuneration

system,

• to set out the approach which the

HKMA will adopt in the supervision of

AIs’ remuneration systems, and

• to outline the level and type of

disclosure in relation to remuneration

expected to be made by AIs.

The key elements of a sound

remuneration system stated in the

guidelines are:

Governance

• The Board of an AI should establish

and maintain a written remuneration

policy covering all employees.

• The Board of an AI is ultimately

responsible for overseeing the

formulation and implementation of the

AI’s remuneration policy, systems and

related control process.

• Risk control personnel, independent

of an AI’s business units, should have

appropriate authority and be actively

involved in the process of design and

implementation of the AI’s

remuneration policy.

• In the event of misconduct, the

amount of remuneration to be

adjusted should be proportionate with

the misconduct outcome, and should

take into account all relevant

indicators of the severity of the impact.

Structure of remuneration

• In determining an appropriate balance

between fixed and variable incentive-

based remuneration, AIs should have

regard to the seniority, role,

responsibilities and activities of their

employees.

• Variable remuneration should be paid

in such a manner as to align an

employee’s incentive awards with

long-term value creation and the time

horizons of risk and should reflect the

employee’s seniority, role,

responsibilities and activities within

the AI.

Measurement of performance for

variable remuneration

• To better align remuneration with

sustainable performance, the overall

amount of an AI’s variable

remuneration should take into

account the AI’s performance over

the longer term.

Alignment of remuneration payouts to

the time horizon of risks

• Deferral of the payment of a portion of

variable remuneration will allow

employees’ performance, including

the associated risks, to be observed

and validated over a period of time

before payment is actually made.

• In principle, the deferral period should

not be less than 3 years.

An AI should make the remuneration

disclosures at least annually covering its

remuneration policy, the fixed and

variable remuneration awarded during

the financial year.

Michael Footman

Partner

+852 2289 2747

[email protected].

com

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary


The Memorandum of Understanding

(MoU) was signed on 15 May

The SFC and the Autoriteit Financiële

Markten (AFM) signed a MoU concerning

Mutual Recognition of Covered Funds

and Management Companies and related

cooperation (Memorandum).

The Memorandum provides a recognition

of asset managers as well as a

framework for mutual recognition of

recognised funds to be offered to the

public in both markets.

Recognised Dutch Funds applying for

SFC authorisation must fall within one or

more than one of the following eligible

fund types:

• general equity funds, bond funds and

mixed funds; and

• index funds (other than exchange-

traded funds)

Key requirements applicable to all

Recognised Dutch Funds are:

Representatives in Hong Kong

• Each Recognised Dutch Fund must

appoint a firm in Hong Kong as its

representative, in compliance with

Chapter 9 and 11.1(b) of the UT Code.

Operational and ongoing

requirements

• The Recognised Dutch Fund must, on

an ongoing basis, remain approved by

AFM for offering to the public in the

Netherlands.

• The Dutch Management Company

shall ensure and procure its

distributors to ensure that Hong Kong

investors are able to bring actions

concerning the Recognised Dutch

Fund and the Dutch Management

Company in the courts of Hong Kong.

• Changes to a Recognised Dutch Fund

shall be made in accordance with the

applicable Dutch and Hong Kong laws

and regulations.

• Following SFC authorisation of a

Recognised Dutch Fund under section

104 of the SFO, if a Recognised

Dutch Fund ceases to meet the

requirements as set out in this

Circular, its Dutch Management

Company shall notify the SFC as soon

as reasonably practicable.

• In case of such breach, units or

shares of the Recognised Dutch Fund

shall not continue to be offered to the

public in Hong Kong and shall not

accept subscriptions from investors in

Hong Kong, without SFC’s prior

approval.

• Termination of a Recognised Dutch

Fund shall require the approval of the

AFM with immediate notice from the

AFM to the SFC. A termination notice

should be submitted to the SFC for

approval.

Sale/distribution and offering

documents

• The sale and distribution of a

Recognised Dutch Fund in Hong Kong

must be conducted by intermediaries

properly licensed by or registered with

the SFC.

• The offering documents and notices to

investors in Hong Kong of a

Recognised Dutch Fund must be

provided in both English and Chinese.

• For offering to the public in Hong

Kong, the Recognised Dutch Fund will

be subject to the applicable

application, authorisation and annual

fees.

Hong Kong has previously signed MoUs

for MRFs with Mainland China,

Switzerland, France, UK and

Luxembourg.

Mutual Recognition of Funds (MRF) between the Netherlands and

Hong Kong

Carlyon Knight-EvansPartner

+852 2289 2711

carlyon.knight-

[email protected]

Helen LiPartner

+852 2289 2741

[email protected]

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary


The rules will take effect upon the commencement of

the new regulatory regime

On 31 October 2018, the IA published for consultation a draft

of the Insurance (Maximum Number of Authorised Insurers)

Rules (“Rules”). The draft Rules prescribe the maximum

number of authorised insurers by which a licensed individual

insurance agent or a licensed insurance agency may be

appointed under the new section 64I(1) of the Insurance

Ordinance (Cap. 41) (“IO”) and the related rules for counting

the number of insurers.

Under the draft Rules, the IA has proposed to raise the

maximum number of insurers from four to five.

The key highlights of the consultation conclusion are:

• The IA considers it appropriate to maintain the existing

framework, which reflects the role of insurance agents as

representatives of insurers and insurers’ responsibilities

for their appointed insurance agents.

• The responsibilities, which insurers bear in this respect,

make it necessary for them to have in place effective

controls and procedures for the oversight of their

appointed insurance agents.

• IA concluded that there is not enough reason for

increasing the cap to five and far greater justification

(particularly from a policy holder protection perspective)

for maintaining the cap at four.

• The current sub-cap of two long term insurers is

considered appropriate.

In conclusion, the IA has decided to adopt the proposals set

out in the draft Rules except for dropping the proposal to raise

the maximum number of insurers from four to five.

The IA expects the Rules to come into operation immediately

upon the commencement of the new regulatory regime for

insurance intermediaries, i.e. the day on which the new

section 74 of the Insurance Companies (Amendment)

Ordinance 2015 comes into operation.

Consultation Conclusions on Draft Insurance (Maximum Number of

Authorised Insurers) Rules

Billy WongPartner

+852 2289 1259

[email protected]

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rules





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary


The rules will take effect upon the commencement of

the new regulatory regime

On 23 November 2018, the IA published for consultation a

draft of the Insurance (Financial and Other Requirements for

Licensed Insurance Broker Companies) Rules (“Rules”).

The key proposed enhancements were:

• to increase the minimum amounts of the paid-up share

capital and net assets of an insurance broker company

from $100,000 to $500,000;

• to increase the minimum limit of indemnity under a

professional indemnity insurance (PII) policy required to be

maintained by an insurance broker company from $3

million to $5 million;

• to introduce a cap on the amount of the deductible for the

aforesaid PII policy;

• to require bank reconciliation of client accounts maintained

by an insurance broker company on a monthly basis; and

• to require disclosure of specific financial information in the

audited financial statements of an insurance broker

company.

Having considered the feedback provided, the IA has decided

to adopt the proposals set out in the draft Rules with the

following main modifications:

• The transitional period for the increase in paid-up share

capital and net assets by existing insurance broker

companies will be extended from slightly more than three

years to slightly more than four years.

• The minimum limit of indemnity under the PII policy

maintained by an insurance broker company will remain at

$3 million.

• The requirements for disclosure of insurance premiums

receivable, referral income and referral expenses in the

audited financial statements of insurance broker

companies will be set aside.

The IA expects the Rules to come into operation immediately

upon the commencement of the new regulatory regime for

insurance intermediaries.

Consultation Conclusions on Draft Insurance (Financial and Other

Requirements for Licensed Insurance Broker Companies) Rules

Billy WongPartner

+852 2289 1259

[email protected]

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary


The IA proposed to take over the regulation of

insurance intermediaries on 23 September 2019

The IA proposes to take over the regulation of insurance

intermediaries from the three Self-Regulatory Organisations

(“SROs”) on 23 September 2019 (Commencement Date),

with the Insurance Companies (Amendment) Ordinance 2015

(Commencement) Notice 2019.

The takeover will mark a major milestone and a reformatory

change for the insurance industry as the IA will become the

sole regulator of all insurance intermediaries in Hong Kong.

On the Commencement Date, the remaining provisions of the

Insurance Companies (Amendment) Ordinance 2015 will

come into operation, together with an array of regulatory

requirements for implementation of the new regulatory regime.

The IA, so far, has formulated the following two set of rules,

which are subsidiary legislation, and is finalising other codes

and guidelines in phases.

• Insurance (Maximum Number of Authorised Insurers)

Rules

• Insurance (Financial and Other Requirements for Licensed

Insurance Broker Companies) Rules

Following are the key transitional matters:

• Insurance intermediaries who are validly registered with

the SROs immediately before the Commencement Date

will be deemed as licensees under the new regime.

• Those who are validly registered as responsible officers of

insurance agencies or chief executives of insurance

brokers will also be deemed as responsible officers of

licensed insurance agencies or licensed insurance broker

companies as appropriate under the new regime.

• Arrangements for online application for formal licences to

be made by deemed licensees will be announced by the IA

after the Commencement Date.

• Complaint and disciplinary cases that are unresolved by

the SROs before the Commencement Date will be handled

by the IA but with reference to the relevant codes,

guidance notes and guidelines issued by the SROs.

• The new conduct requirements will not be retrospectively

applied against insurance intermediaries.

• Matters concerning registration, complaints and

disciplinary actions in relation to insurance intermediaries

will continue to be handled by the SROs before the

Commencement Date.

• To ensure a smooth transition, there will be cut-off

arrangements for different matters and the relevant details

will be announced by the respective SROs in due course.

.

Commencement Date for New Regulatory Regime for Insurance

Intermediaries

Billy WongPartner

+852 2289 1259

[email protected]

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary

PwC · 11

SFC Circular to intermediaries: Online submission

of Paragraph 12.5 Notifications

The SFC has introduced a new online service for

licensed and registered persons to submit Paragraph

12.5 Notifications to the SFC electronically.

As stipulated in paragraph 12.5 of the Code of Conduct

for Persons Licensed by or Registered with the

Securities and Futures Commission, intermediaries

must immediately notify the SFC upon the occurrence

of any material or suspected breach, infringement of or

non-compliance with any law, rules, regulations or

codes administered by the SFC. A circular dated 14

September 2018 reminded intermediaries of the

importance of compliance with this requirement.

The online service features standardised reporting

templates and makes it easier for intermediaries to

submit a notification to the SFC. It also facilitates the

SFC’s assessment of the impact of reported incidents

on the fitness and properness of intermediaries,

licensed representatives and responsible officers.

HKMA Circular on Use of Personal Data in Fintech

Development

The HKMA issued the circular on 3 May 2019 to

encourage AIs to adopt and implement the Ethical

Accountability Framework for the collection and use of

personal data (the Framework) issued by the Office of

the Privacy Commissioner for Personal Data (PCPD).

The HKMA, in collaboration with the Hong Kong

Association of Banks (HKAB), has been engaging with

the PCPD to provide more guidance to AIs on the

proper use of personal data in the online environment.

At a seminar jointly organised by the HKMA and HKAB

in April 2019, Mr. Stephen Kai-yi Wong, the Privacy

Commissioner for Personal Data, outlined the

Framework to the industry.

The adoption of “privacy by design” and “privacy by

default” when developing fintech initiatives are some of

the good practices shared.

Moreover, the concept of data ethics and stewardship

was introduced, and the “Data Stewardship

Accountability, Data Impact Assessments and

Oversight Models” (the Models) supporting the

Framework were explained.

The Models can assist AIs in addressing privacy

concerns of customers and enhance their trust in using

fintech services.

The HKMA supports the concept of data ethics and

stewardship in the context of collecting and using

personal data. It encourages AIs to adopt the

Framework and implement the Models in the

development of fintech products and services.

Further details about the Framework and the Models,

as well as training programmes tailored for the banking

sector, can be found on the website of the PCPD.

SFC Circular to licensed corporations: List of

comparable OTCD jurisdictions

The SFC published in a Gazette Notice the jurisdictions

which are determined by the SFC to be comparable

OTCD jurisdictions under paragraph 20.5 of the Code of

Conduct for Persons Licensed by or Registered with the

SFC, effective 14 June 2019.

Comparable OTCD jurisdictions

Australia, Canada, Mainland China, France, Germany,

Ireland, Italy, Japan, Netherlands, Republic of Korea,

Singapore, Spain, South Africa, Switzerland, United

Kingdom, and United States of America

Regulatory Updates Newsletter — May 2019

Other Regulatory Updates

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary

PwC · 12

HKMA introduces key measures on sustainable

banking and green finance

The HKMA unveiled three sets of measures to support

and promote Hong Kong’s green finance development.

These measures include:

1) Green and Sustainable Banking

• Phase I: developing a common framework to assess

the “Greenness Baseline” of individual banks;

• Phase II: engaging the industry and other relevant

stakeholders in a consultation on the supervisory

expectation or requirement on Green and

Sustainable Banking; and

• Phase III: after setting the targets, implement,

monitor and evaluate banks’ progress.

2) Responsible Investment

• As the manager of the Exchange Fund, the HKMA

will adopt a principle that priority can be given to

Green and ESG investments if the long term return

is comparable to other investments on a risk-

adjusted basis.

3) Centre for Green Finance (CGF)

• Establish the CGF under the HKMA Infrastructure

Financing Facilitation Office (IFFO).

• It will serve as a platform for technical support and

experience sharing for the green development of the

Hong Kong banking and finance industry.

• The CGF, together with the IFC, will co-organise the

next Climate Business Forum in Hong Kong in early

2020.

• The Forum is the IFC’s flagship event to discuss

trends and business opportunities relating to climate

change and sustainability.

Meanwhile, the Government of the Hong Kong Special

Administrative Region of the People’s Republic of China

announced that it expects to attend a series of investor

meetings in relation to a proposed green bond offering.

Subject to market conditions, a USD-denominated

green bond offering may follow.

Sixteenth progress report on adoption of the Basel

regulatory framework

The updated progress report provides a high-level view

of Basel Committee members' progress in adopting

Basel III standards as of end-March 2019.

It focuses on the status of adoption of all the Basel III

standards, including the finalised Basel III post-crisis

reforms published in December 2017, to ensure that

they are transformed into national law or regulation

according to the internationally agreed time frames.

The report includes the status of adoption of the Basel

III risk-based capital standards, the leverage ratio, the

standards for global and domestic systemically

important banks (SIBs) and interest rate risk in the

banking book (IRRBB), the Net Stable Funding Ratio

(NSFR), the large exposures framework and the

disclosure requirements.

Hong Kong SAR has scored well in this report, having

completed adoption or is in process of adoption with

draft regulations published for majority of the Basel

standards considered.

Regulatory Updates Newsletter — May 2019

Other Regulatory Updates

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary

PwC · 13Regulatory Updates Newsletter — May 2019

Glossary

AI Authorised Institutions IC-2 Internal Audit Function

AML Anti-Money Laundering ICO Initial Coin Offering

BC Basel Committee IFRS International Financial Reporting Standard

BCBS Basel Committee on Banking Supervision IOSCO International Organization of Securities Commission

CFT Counter-Financing of Terrorism IR-1 Interest Rate Risk Management

CG-1 Corporate Governance of Locally Incorporated Authorized Institutions IRR Interest Rate Risk

FATF Financial Action Task Force IRRBB Interest Rate Risk in the Banking Book

FinTech Financial Technology LC Licensed Corporation

FMCC Fund Manager Code of Conduct MAS Monetary Authority of Singapore

FI Financial Institutions MoU Memorandum of Understanding

FSB Financial Stability Board RO Responsible Officer

HKMA The Hong Kong Monetary Authority RE-1 Recovery Planning

IA The Insurance Authority SFC The Securities and Futures Commission

IAF Internal Audit Function SFO Securities and Futures Ordinance

IC-1 Risk Management Framework SPM Supervisory Policy Manual

Executive

Summary

SFC Circular on

Recent inspection

findings related to

client facilitation

FATF Private

Sector

Consultative

Forum

HKMA Consultation

on Guidelines on a

Sound Remuneration

System

MRF between the

Netherlands and

Hong Kong

Consultation


Insurance (Maximum


Insurers) Rule





Companies) Rules

Commencement

Date for New

Regulatory Regime

for Insurance

Intermediaries

Other

Regulatory

Updates

Glossary

financial services risk and regulation - pwc · the financial services market landscape. in this...

Documents