Cap. 155 sub. leg. S

Banking (Exposure Limits) Rules (Cap. 155, section 81A)(Enacting provision omitted—E.R. 4 of 2019)[1 July 2019] Part 1 Preliminary 1. (Omitted as spent—E.R. 4 of 2019) 2. Interpretation (1) In these Rules—book (帳簿), in relation to an authorized institution, means its banking book or trading book;Capital Rules (《資本規則》) means the Banking (Capital) Rules (Cap. 155 sub. leg. L);CIS means a collective investment scheme;consolidated basis (綜合基礎) has the meaning given by rule 6(5); (L.N. 169 of 2023)cryptoasset-related exposure (加密資產關聯風險承擔) means—(a) a cryptoasset exposure (other than a cryptoasset exposure mentioned in paragraph (c));(b) a default risk exposure in respect of derivative contracts or SFTs on cryptoassets; or(c) a cryptoasset exposure in respect of a cryptoasset that references a securitization transaction or a CIS; (L.N. 152 of 2025)determine (斷定) includes calculate;financial facility (資金融通), in relation to an authorized institution, means—(a) an advance, loan or credit facility (including a letter of credit);(b) a financial guarantee; or(c) a liability;land (土地) includes land situated in or outside Hong Kong;provide (提供), in relation to a financial facility, means—(a) for an advance, loan or credit facility (including a letter of credit)—grant or permit to be outstanding;(b) for a financial guarantee—give; or(c) for a liability—incur; (L.N. 169 of 2023)solo-consolidated basis (單獨—綜合基礎) has the meaning given by rule 6(5); (L.N. 169 of 2023)specified SFT (指明SFT) has the meaning given by section 68C(5) of the Capital Rules; (L.N. 169 of 2023)unconsolidated basis (非綜合基礎) has the meaning given by rule 6(5). (L.N. 169 of 2023)(2) In these Rules, an expression specified below has the meaning given by section 2(1) of the Capital Rules—Additional Tier 1 capital (額外一級資本);banking book (銀行帳);CET1 capital (CET1資本);collective investment scheme (集體投資計劃);credit derivative contract (信用衍生工具合約);cryptoasset (加密資產); (L.N. 152 of 2025)cryptoasset exposure (加密資產風險承擔); (L.N. 152 of 2025)default risk exposure (違責風險的風險承擔); (L.N. 152 of 2025)derivative contract (衍生工具合約);fair value (公平價值);forward contract (遠期合約);futures contract (期貨合約);option contract (期權合約);repo-style transaction (回購形式交易);securities financing transaction (證券融資交易); (L.N. 169 of 2023)securitization transaction (證券化交易); (L.N. 152 of 2025)SFT; (L.N. 169 of 2023)swap contract (掉期合約);Tier 1 capital (一級資本);trading book (交易帳).(3) To avoid doubt, a reference in these Rules to a derivative contract includes a credit derivative contract.(4) A reference in these Rules to a formula followed by a number (including an alphanumeric number) is a reference to the formula in these Rules bearing that number. 3. General provisions (1) An approval or consent of the Monetary Authority in respect of any matter under these Rules may only be sought by making an application in a specified form (if any) to the Monetary Authority.(2) A notice given or served by the Monetary Authority under these Rules to or on all authorized institutions, or to or on a class of authorized institutions, may be given or served by publishing it in the Gazette.(3) In determining whether anything meets the description of “appropriate”, “competent”, “prudent”, “reasonable”, “relevant” or “reliable” in any provision of these Rules, regard must be had to any guidelines or codes of practice issued under the Ordinance that are applicable to the provision. 4. Conversion into Hong Kong dollar For—(a) valuing an exposure under these Rules; or(b) determining a value or amount under these Rules,if a value or amount is denominated in a currency other than the Hong Kong dollar, it must be converted into a Hong Kong dollar figure. 5. Valuation of exposure at fair value (1) An authorized institution must establish and maintain effective valuation systems, controls and procedures for valuing its exposures at fair value under these Rules to ensure that the valuation is prudent and reliable.(2) An authorized institution must make adjustments (if appropriate) to the valuation of its exposures at fair value to factor in—(a) the limitations of the valuation model or methodology and the data used in the valuation process;(b) the liquidity of the exposures; and(c) other relevant factors that may reasonably be expected to affect the prudence and reliability of the valuation.(3) To avoid doubt, adjustments made under subrule (2) may exceed the adjustments made by the institution in accordance with the financial reporting standards adopted by it.(4) If, in accordance with any provision of these Rules, an authorized institution must value any exposure or item at fair value, this rule applies in determining the fair value. 6. Monetary Authority may require applying these Rules on unconsolidated or consolidated basis (1AA) An authorized institution must comply with the requirements of any provision of these Rules applicable to it on an unconsolidated basis, unless otherwise required in a notice given to it under subrule (1). (L.N. 169 of 2023)(1) Subject to subrule (1A), for applying any provision of these Rules to an authorized institution incorporated in Hong Kong that has any subsidiary, the Monetary Authority may, by written notice to the institution, require it to apply the provision— (L.N. 169 of 2023)(a) on an unconsolidated basis in respect of the institution;(b) on a consolidated basis in respect of the institution and 1 or more of its subsidiaries specified in the notice; or(c) on an unconsolidated basis in respect of the institution, and on a consolidated basis in respect of the institution and 1 or more of its subsidiaries specified in the notice.(1A) For applying any provision of these Rules to an authorized institution incorporated in Hong Kong that has any subsidiary on an unconsolidated basis, the Monetary Authority may, in a notice under subrule (1), require the institution to apply the provision on a solo-consolidated basis instead of a solo basis in respect of those of its subsidiaries specified in the notice. (L.N. 169 of 2023)(2) For subrules (1AA), (1) and (1A)— (L.N. 169 of 2023)(a) applying a provision on a solo basis means applying the provision on the basis that the business of the institution includes—(i) if the institution is an authorized institution incorporated in Hong Kong—all of its business in Hong Kong (being the business of its principal place of business in Hong Kong and its local branches (if any)) and the business of its branches (if any) outside Hong Kong; and(ii) if the institution is an authorized institution incorporated outside Hong Kong—all of its business in Hong Kong (being the business of its principal place of business in Hong Kong and its local branches (if any), as if the business were collectively the business of a separate authorized institution); (L.N. 169 of 2023; 14 of 2025 s. 192)(ab) applying a provision on a solo-consolidated basis means applying the provision on the basis that the business of the institution includes those mentioned in paragraph (a)(i) and the business of its subsidiaries as may be specified in the notice given to the institution; and (L.N. 169 of 2023)(b) applying a provision on a consolidated basis means applying the provision on the basis that the business of the institution includes those mentioned in paragraph (a)(i) and the business of its local subsidiaries or subsidiaries outside Hong Kong as may be specified in the notice given to the institution. (L.N. 169 of 2023)(3) If a notice is given to an authorized institution under subrule (1), the provision that is the subject matter of the notice is to be applied on the basis specified in the notice.(3A) While a notice given to an authorized institution under subrule (1) to apply a provision on a solo-consolidated basis, a consolidated basis or both bases (rule 6 notice) remains in effect, the institution must give written notice to the Monetary Authority of any of the following matters as soon as practicable after the institution is aware of the matter or ought to be aware of the matter—(a) a subsidiary specified in the rule 6 notice ceasing to be a subsidiary of the institution;(b) an entity becoming a subsidiary of the institution;(c) the principal activities of a subsidiary referred to in paragraph (b);(d) any significant change to the principal activities of the institution or any of its subsidiaries (including a subsidiary specified in the rule 6 notice and a subsidiary referred to in paragraph (b)). (L.N. 169 of 2023)(4) Any duty of confidentiality of an authorized institution’s subsidiary is not to be treated as contravened because of the supply of any information by the subsidiary to the institution for enabling or assisting the institution to comply with a notice given to the institution under subrule (1).(5) In this rule—consolidated basis (綜合基礎), in relation to the application of any provision of these Rules, means the basis set out in subrule (2)(b) on which an authorized institution applies the provision;solo basis (單獨基礎), in relation to the application of any provision of these Rules, means the basis set out in subrule (2)(a) on which an authorized institution applies the provision;solo-consolidated basis (單獨—綜合基礎), in relation to the application of any provision of these Rules, means the basis set out in subrule (2)(ab) on which an authorized institution applies the provision;unconsolidated basis (非綜合基礎) means—(a) subject to paragraph (b), solo basis or solo-consolidated basis as specified in a notice given to an authorized institution under subrule (1); or(b) for an authorized institution that does not fall within subrule (1)—solo basis. (L.N. 169 of 2023) 7. Notifiable events (L.N. 169 of 2023)(1) If a notifiable event occurs in relation to an authorized institution, it must—(a) notify the Monetary Authority of the event as soon as practicable after the institution is aware of the event or ought to be aware of the event; and (L.N. 169 of 2023)(b) provide the Monetary Authority with any particulars of the event that the Monetary Authority requests.(2) In this rule—notifiable event (須通報事件) means a failure to comply with—(a) rule 11 or (if applicable) that rule as varied under rule 12(1);(b) a condition under—(i) rule 14(1)(b)(ii);(ii) rule 14(1)(c)(ii);(iii) rule 14(1)(e); or(iv) rule 14(3)(b);(c) rule 23(1) or (3)(a) or 24(6);(d) a condition under—(i) rule 23(3)(b) or (4); or(ii) rule 24(2) or (4)(a) or (if applicable) as amended under rule 24(4)(b);(e) rule 27(1) or (2);(f) a condition under rule 28(2);(g) (Repealed L.N. 152 of 2025)(h) rule 35(a) or (b) or (if applicable) that rule as varied under rule 36(1);(i) a condition under rule 38(b)(ii);(j) rule 44(1)(a) or (b) or (2)(a) or (b) or (if applicable) that rule as varied under rule 45(1);(k) a condition under—(i) (Repealed L.N. 169 of 2023)(ii) rule 48(3)(b); or(iii) rule 57(1)(d)(ii);(l) rule 87(a), (b) or (c) or (if applicable) that rule as varied under rule 88(1); or(m) a condition under rule 92(2)(b). Part 2 Equity Division 1 General 8. Interpretation of Part 2 (1) In this Part—aggregate equity exposure (股權風險承擔總額)—see rule 13;equity derivative contract (股權衍生工具合約) means a futures contract, forward contract, swap contract, option contract or similar derivative contract the value of which is determined by reference to the value of, or any fluctuation in the value of, 1 or more than 1 underlying equity or an underlying equity index (being an index calculated by reference to a basket of equities);equity exposure (股權風險承擔)—see rule 9;equity exposure ratio (股權風險承擔比率), in relation to an authorized institution, means the ratio, expressed as a percentage, of the institution’s aggregate equity exposure to the amount of the institution’s Tier 1 capital.(2) A reference in this Part to the weight of an equity in an equity index is a reference to the weight of that equity in the equity index as specified by the index provider that compiles the index.(3) A reference in this Part to the weight of an equity in a basket of equities is a reference to the ratio of the fair value of that equity to the aggregate fair value of all the equities in the basket of equities.(4) A reference in this Part to an equity interest includes a cryptoasset that conveys the economic substance of equity ownership. (L.N. 152 of 2025) 9. Interpretation: equity exposure (1) For this Part, an equity exposure of an authorized institution is—(a) subject to subrule (2), an exposure of the institution (whether in its banking book or trading book) that falls within section 54A of the Capital Rules; or(b) an exposure (including an exposure that falls within paragraph (c) of the definition of cryptoasset-related exposure in rule 2(1)) that arises from the institution’s holding in the equity components of a CIS that is engaged in the business of investing in equity or the acquisition and disposal of equity interests, if the holding is not consolidated for determining the institution’s capital base in accordance with Part 3 of the Capital Rules. (L.N. 152 of 2025)(2) For subrule (1)(a), section 54A(1)(c) and (d) of the Capital Rules are taken to read as—“(c) (if classification of the exposure is for the purpose of applying any provision of Part 2 of the Banking (Exposure Limits) Rules (Cap. 155 sub. leg. S) on a solo-consolidated basis as specified in a notice given to the institution under rule 6(1) of those Rules that remains in effect) the issuer is the subject of consolidation specified in that notice; or(d) (if classification of the exposure is for the purpose of applying any provision of Part 2 of the Banking (Exposure Limits) Rules (Cap. 155 sub. leg. S) on a consolidated basis as specified in a notice given to the institution under rule 6(1) of those Rules that remains in effect) the issuer is the subject of consolidation specified in that notice.”.(3) To avoid doubt, a cryptoasset-related exposure in respect of a cryptoasset that is a tokenised version of, or references, an instrument mentioned in section 54A(1) of the Capital Rules is an equity exposure for this Part. (L.N. 152 of 2025)(L.N. 169 of 2023) 10. Application of Part 2 This Part applies to an authorized institution incorporated in Hong Kong. Division 2 Limit on Equity Exposure 11. Limit on equity exposure Subject to (if applicable) any variation under rule 12(1), an authorized institution must at all times maintain an equity exposure ratio not exceeding 25%. 12. Monetary Authority may vary limit on equity exposure (1) Subject to subrules (3), (4), (5) and (6), the Monetary Authority may, by written notice served on an authorized institution, vary the limit prescribed under rule 11 for the institution if the Monetary Authority, after taking into account the considerations set out in subrule (2), is satisfied on reasonable grounds that it is prudent to make the variation.(2) The considerations are—(a) the risks associated with the level or concentration of the institution’s equity exposures;(b) any risk mitigation measures taken by the institution to manage those risks;(c) the risks associated with those measures;(d) any prevailing or reasonably anticipated market conditions that may affect the risks associated with the level or concentration of the institution’s equity exposures; and(e) any other factors that the Monetary Authority considers relevant.(3) If the Monetary Authority proposes to serve a notice (proposed notice) under subrule (1) on an authorized institution, the Monetary Authority must serve a draft of the notice (draft notice) on the institution.(4) A draft notice must—(a) specify—(i) the proposed variation of the limit concerned; and(ii) the circumstances pertaining to, and the grounds for, the proposed variation; and(b) contain a statement that the institution may, within 14 days (or a longer period approved by the Monetary Authority in writing in any particular case) from the date of service of the draft notice, make written representation to the Monetary Authority on any or all of the matters specified in the draft notice.(5) If an authorized institution makes any written representation in relation to a draft notice served on it, the Monetary Authority may, after considering the representation—(a) serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice;(b) serve a notice on the institution under subrule (1) in terms modified to take account of the representation on being satisfied that the modification should be made; or(c) elect not to serve a notice on the institution under subrule (1) if satisfied by the representation that the proposed notice should not be served on the institution.(6) If no representation is made by an authorized institution in relation to a draft notice served on it, the Monetary Authority may serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice.(7) A decision of the Monetary Authority under subrule (1) is a decision to which section 101B(1) of the Ordinance applies.(8) To avoid doubt—(a) the Monetary Authority may serve a draft notice on an authorized institution to supersede an earlier draft notice served on the institution; and(b) the reference to same terms in subrule (5)(a) or (6) does not include the statement mentioned in subrule (4)(b). Division 3 Determination of Aggregate Equity Exposure 13. Aggregate equity exposure (1) Subject to subrules (2), (3) and (4) and rule 14, an authorized institution’s aggregate equity exposure is the sum of the value of the institution’s equity exposures (valued in accordance with Division 4), arising from items in its books.(2) The equity exposure arising from a long position and a short position in the same equity interests, in each of the institution’s books, may be offset, irrespective of the instrument from which the position is derived.(3) However, an equity exposure arising from an item in the institution’s banking book and an equity exposure arising from an item in its trading book must not be offset against each other.(4) In determining the institution’s aggregate equity exposure under subrule (1), a net short position in an equity interest is treated as if it were a net long position in the equity interest. 14. Equity exposure disregarded (1) The following equity exposures of an authorized institution are not to be taken into account for determining the institution’s aggregate equity exposure—(a) an equity exposure arising from the holding of any capital interest as security for a financial facility provided by the institution;(b) an equity exposure arising from the holding of any capital interest acquired by the institution in the course of the satisfaction of debts due to it, if—(i) the following period has not expired—(A) the period from the date of the acquisition of the capital interest to the date on which the capital interest may be disposed of at the earliest suitable opportunity, or the period of 18 months after the acquisition of the capital interest, whichever period expires first; or(B) a longer period approved by the Monetary Authority in writing in any particular case; and(ii) where a longer period is approved under subparagraph (i)(B)—the institution complies with the conditions that the Monetary Authority may attach to the approval;(c) an equity exposure arising from the holding of any capital interest acquired under an underwriting or subunderwriting contract, if—(i) the following period has not expired—(A) the period of 7 working days after the acquisition of the capital interest; or(B) a longer period approved by the Monetary Authority in writing in any particular case; and(ii) where a longer period is approved under subparagraph (i)(B)—the institution complies with the conditions that the Monetary Authority may attach to the approval;(d) an equity exposure arising from a commitment to acquire any capital interest under an underwriting or subunderwriting contract; (L.N. 169 of 2023)(e) with the written approval of the Monetary Authority, an equity exposure arising from the holding of any capital interest of— (L.N. 152 of 2025)(i) another authorized institution (whether incorporated in or outside Hong Kong); or(ii) a company carrying out nominee, executor or trustee functions, or other functions related to banking business, the business of taking deposits, insurance business, investments or other financial services,if the institution complies with the conditions that the Monetary Authority may attach to the approval;(f) an equity exposure arising from the holding of any capital interest if the exposure is deducted in determining the capital base of the institution in accordance with Part 3 of the Capital Rules but, if only part of the exposure is so deducted, only that part is not to be taken into account; (L.N. 169 of 2023)(g) an equity exposure up to the amount incurred by the institution specifically to offset any holding described in paragraph (a), (b), (c), (e) or (f) or a commitment described in paragraph (d);(h) an equity exposure arising from the holding of assets, or incurring of liabilities, in relation to a defined benefit pension fund or plan;(i) an equity exposure that is specified in a consent given under subrule (2) if the conditions attached to the consent under subrule (3)(b) are complied with.(2) The Monetary Authority may give a written consent to allow an equity exposure or a class of equity exposures not to be taken into account for determining an authorized institution’s aggregate equity exposure, if the Monetary Authority considers that it is reasonable to do so, having regard to—(a) the nature of, and the risks associated with, the equity exposure or class of equity exposures;(b) any risk mitigation measures taken by the institution to manage those risks;(c) the risks associated with those measures; and(d) any other factors that the Monetary Authority considers relevant.(3) The Monetary Authority may—(a) give a written consent under subrule (2) to an authorized institution or a class of authorized institutions; and(b) attach conditions to the consent.(4) In subrule (1)—capital interest (資本權益), in relation to an authorized institution, means—(a) any share capital issued by a company; or(b) any instrument that, if it were issued by an authorized institution, would satisfy the requirements for inclusion in the institution’s CET1 capital or Additional Tier 1 capital under Division 2 of Part 3 of the Capital Rules. Division 4 Valuation of Equity Exposure 15. General—current book value or contracted amount (1) An authorized institution’s equity exposure arising from an on-balance sheet item (other than the shares of a company, a repo-style transaction, an equity derivative contract, an item with an embedded equity derivative contract or a CIS) must be valued at the current book value of the item.(2) An authorized institution’s equity exposure arising from an off-balance sheet item (other than an equity derivative contract) must be valued at the contracted amount of the item. 16. Equity exposure arising from shares of company The value of an authorized institution’s equity exposure arising from the shares of a company is the sum of—(a) the current book value of the shares; and(b) the amount that is remaining unpaid on the shares and is not included in the current book value of the shares. 17. Equity exposure arising from equity derivative contract (1) An authorized institution’s equity exposure arising from each of its futures contracts, forward contracts and option contracts must be valued, with respect to the underlying equity—(a) for a futures contract or forward contract relating to an individual equity or a basket of equities—at the fair value of the underlying equity or underlying basket of equities, as may be appropriate, under the contract;(b) for a futures contract or forward contract relating to an equity index—(i) at the current index value multiplied by the monetary value of 1 index point set by the futures exchange where the futures contract is traded; or(ii) at the fair value of the underlying basket of equities by reference to which the index is compiled; or(c) for an option contract relating to an individual equity, a basket of equities or an equity index—at the delta-weighted position of the contract.(2) In valuing an authorized institution’s equity exposure arising from an equity swap contract, the contract must be treated as—(a) if the institution is receiving under the contract an amount based on the change in value of a particular equity, a basket of equities or an equity index—a long position; or(b) if the institution is paying under the contract an amount based on the change in value of a different equity, a basket of equities or an equity index—a short position.(3) In this rule—delta-weighted position (得爾塔加權持倉) has the meaning given by section 281 of the Capital Rules. 18. Alternative valuation of equity exposure arising from equity derivative contract (1) This rule applies to the valuation of an equity exposure of an authorized institution, arising from an equity derivative contract if there is an underlying basket of equities or equity index under the contract.(2) If the institution has access to daily information for valuing its equity exposure with respect to the individual underlying equities under the equity derivative contract, the institution may, despite rule 17 and subject to subrule (3), break down the value of the equity exposure into values of equity exposures in the individual underlying equities in the basket of equities or equity index.(3) For subrule (2), the value of the institution’s equity exposure with respect to an individual underlying equity is calculated as the weight of that equity in the basket of equities or equity index multiplied by the value of the equity derivative contract valued in accordance with rule 17.(4) A position of the institution in the individual underlying equities derived in accordance with subrule (2) may be offset against the institution’s opposite position in the same equities under rule 13(2). 19. Equity exposure arising from specified SFTs In valuing an authorized institution’s equity exposure arising from a specified SFT, the institution must—(a) treat the equity interest arising from the asset sold or lent, or the asset provided as collateral, under the specified SFT as an on-balance sheet exposure of the institution as if the institution had never entered into the specified SFT; and (L.N. 152 of 2025)(b) value the exposure in accordance with the applicable provision in Division 4.(L.N. 169 of 2023) 20. Equity exposure arising from CIS (1) An authorized institution’s equity exposure arising from an on-balance sheet item relating to the equity components of a CIS must be valued—(a) at the current book value of the institution’s holding of interests arising from the CIS;(b) subject to subrule (2), by using Formula 1; or(c) subject to subrule (4), by using Formula 2.(2) For subrule (1)(b), Formula 1 may be used if the maximum value of equity exposures permitted to be incurred by the CIS under its investment mandate is known to the institution.(3) Formula 1 is as follows—Formula 1 ECIS = Min [V, V × CISmax]where—ECIS= the value of the authorized institution’s equity exposure arising from an on-balance sheet item relating to the equity components of the CIS;V= the current book value of the institution’s holding of interests arising from the CIS; andCISmax= the ratio of the maximum value of equity exposures permitted to be incurred by the CIS under its investment mandate to the total net asset value of the CIS as reported in the CIS’s latest financial report (the maximum value of equity exposures permitted to be incurred by the CIS under its investment mandate must include the values of equity exposures converted from the CIS’s holding of equity derivative contracts, and be determined on the assumption that the CIS borrows to the maximum value permitted under the mandate).(4) For subrule (1)(c), Formula 2 may be used if—(a) the institution has access to information with respect to the underlying exposure of the CIS and the following requirements are satisfied—(i) the frequency of financial reporting of the CIS is not lower than that of the institution; and(ii) the information is sufficient to allow the institution to value its equity exposure arising from the CIS by using that Formula; and(b) the information provided to the institution under paragraph (a) is verified by an independent third party such as the depository, the custodian or the manager of the CIS, or the information is subscribed information provided by a competent and reliable third-party market data provider. (L.N. 152 of 2025)(5) Formula 2 is as follows—Formula 2 ECIS = Min [V, V × (CISactual/CISNAV)]where—ECIS= the value of the authorized institution’s equity exposure arising from an on-balance sheet item relating to the equity components of the CIS;V= the current book value of the institution’s holding of interests arising from the CIS;CISactual= the total value of equity exposures arising from the interests held by the CIS as reported in the CIS’s latest financial report (the CIS’s holding of equity derivative contracts must be converted into values of equity exposures with respect to the underlying equity for inclusion in this total value); andCISNAV= the total net asset value of the CIS as reported in the CIS’s latest financial report.(6) If—(a) an authorized institution uses Formula 2 under subrule (1)(c) to value its equity exposure arising from an on-balance sheet item relating to the equity components of a CIS; and(b) the total value of the exposures arising from the interests held by the CIS does not exceed the total net asset value of the CIS as reported in the CIS’s latest financial report,the institution may break down the value calculated in accordance with Formula 2 into positions in the individual underlying equities in the CIS by using Formula 3.(7) For subrule (6), the total value of the exposures arising from the interests held by a CIS is the sum of the value of all exposures arising from the interests held by the CIS with respect to any asset class (including cash and exposures converted from the CIS’s holding of derivative contracts).(8) A position of an authorized institution in an individual underlying equity calculated by using Formula 3 may be offset against the institution’s opposite position in the same equity under rule 13(2).(9) Formula 3 is as follows—Formula 3 Eu = ECIS × CISu/CISactualwhere—Eu= the value of the authorized institution’s equity exposure with respect to the underlying equity held by the CIS;ECIS= the value of the institution’s equity exposure arising from an on-balance sheet item relating to the equity components of the CIS calculated by using Formula 2;CISu= the value of the equity exposure with respect to the underlying equity held by the CIS as reported in the CIS’s latest financial report; andCISactual= the total value of equity exposures arising from the interests held by the CIS as reported in the CIS’s latest financial report (the CIS’s holding of equity derivative contracts must be converted into values of equity exposures with respect to the underlying equity for inclusion in this total value).(10) If an authorized institution has any off-balance sheet unfunded commitment to invest in a CIS, the institution’s equity exposure arising from the commitment must be valued at the contracted amount. Part 3 Acquisition of Share Capital of Company Division 1 General 21. Interpretation of Part 3 (1) In this Part— (L.N. 152 of 2025)value (價值), in relation to any shares of a company, means the sum of—(a) the current book value of the shares; and(b) the amount that is remaining unpaid on the shares and is not included in the current book value of the shares.(2) A reference in this Part to a share or share capital includes a cryptoasset that conveys the economic substance of equity ownership. (L.N. 152 of 2025) 22. Application of Part 3 This Part applies to an authorized institution incorporated in Hong Kong. Division 2 Limit on Acquisition of Share Capital of Company 23. Limit on acquisition of share capital of company (1) Subject to subrules (2) and (3), an authorized institution must not, except with a consent given under rule 24(1), acquire all or part of the share capital of a company (whether or not the company was established by the institution)—(a) whether by 1 acquisition or a series of acquisitions; and(b) by whatever means,to a value equivalent to 5% or more of the amount of the institution’s Tier 1 capital at the time of the acquisition.(2) Subrule (1) does not apply to—(a) the acquisition of any share capital of a company—(i) in the course of the satisfaction of debts due to the institution; or(ii) subject to subrule (3), under an underwriting or subunderwriting contract;(b) the acquisition of any share capital of a company in the ordinary course of the insurance business of the institution or a consolidated subsidiary of the institution if—(i) the acquisition—(A) is principally funded by the insurance premiums collected from the insurance business of the institution or a consolidated subsidiary of the institution, including any investment return and reinvestment return from such premiums; and(B) complies with applicable regulations imposed by the relevant insurance authority or regulator; and(ii) the institution and the relevant consolidated subsidiary have established adequate policies and procedures and have implemented them effectively to ensure that the share acquisition decisions in the insurance business are made independently from the share acquisition decisions in other businesses of the institution and the subsidiary; or(c) the acquisition of any share capital of a company (whether by 1 acquisition or a series of acquisitions) booked in the trading book, if the assessment amount is less than— (L.N. 152 of 2025)(i) 5% of the amount of the institution’s Tier 1 capital; or(ii) a higher percentage approved by the Monetary Authority in writing, if the Monetary Authority considers that it is reasonable to do so, having regard to—(A) the nature of, and risks associated with, the relevant acquisition;(B) any policies and procedures implemented by the institution to monitor and control those risks; and(C) any other factors that the Monetary Authority considers relevant.(3) The institution must—(a) dispose of the share capital described in subrule (2)(a)(ii) within—(i) 7 working days after the acquisition of the share capital; or(ii) a longer period approved by the Monetary Authority in writing in any particular case; and(b) where a longer period is approved under paragraph (a)(ii)—comply with the conditions that the Monetary Authority may attach to the approval.(4) The Monetary Authority may attach conditions to an approval given under subrule (2)(c)(ii).(5) In this rule—assessment amount (評估數額), in relation to an authorized institution’s proposed acquisition of any share capital of a company for which the institution seeks to apply subrule (2)(c), means the part of the institution’s aggregate equity exposure (within the meaning of rule 13) that would, if the acquisition were made and the resulting equity exposure (within the meaning of rule 9) were duly booked, be—(a) attributable to the institution’s equity exposure (within the meaning of rule 9) to the company; and(b) booked in the institution’s trading book; (L.N. 152 of 2025)consolidated subsidiary (綜合附屬公司), in relation to an authorized institution to which a notice is given under rule 6(1) requiring it to apply this rule on a consolidated basis, means a subsidiary of the institution that is specified in the notice. 24. Consent for acquisition (1) On application by an authorized institution, the Monetary Authority may give a written consent to allow 1 acquisition or a series of acquisitions, described in rule 23(1).(2) The Monetary Authority may attach conditions to a consent given under subrule (1).(3) If the Monetary Authority refuses to give a consent under subrule (1), the Monetary Authority must, by written notice to the institution, inform the institution of the refusal.(4) Without limiting subrule (1), the Monetary Authority may, by written notice to the institution—(a) attach a further condition to a consent given under subrule (1); or(b) amend or cancel a condition attached to the consent.(5) If, after a consent is given under subrule (1), the Monetary Authority considers that it is no longer reasonable to allow the institution to hold share capital of the relevant company to a value equivalent to 5% or more of the amount of the institution’s Tier 1 capital, the Monetary Authority may, by written notice to the institution, revoke the consent.(6) If a consent given to an authorized institution is revoked under subrule (5), the institution must not, after the revocation takes effect, hold share capital of the relevant company to a value equivalent to 5% or more of the amount of the institution’s Tier 1 capital.(7) Each of the following decisions of the Monetary Authority is a decision to which section 101B(1) of the Ordinance applies—(a) a decision to refuse to give a consent under subrule (1);(b) a decision to attach conditions under subrule (2);(c) a decision to attach a further condition, or to amend a condition, under subrule (4);(d) a decision to revoke a consent under subrule (5). (L.N. 152 of 2025) Part 4 Financial Facility against Security of Own Shares etc. Division 1 General 25. Interpretation of Part 4 (1) In this Part—Basel Committee’s capital standards (巴委會資本標準) means the capital standards first published by the Basel Committee in July 1988, entitled “International Convergence of Capital Measurement and Capital Standards”, as amended or updated from time to time;capital base eligible (具資本基礎資格), in relation to an instrument issued by an authorized institution incorporated outside Hong Kong, means eligible to be included in the institution’s capital base under any regulatory regime in the jurisdiction of the institution’s incorporation—(a) that is applicable to the institution; and(b) that prescribes requirements relating to the capital resources of financial institutions for implementing in that jurisdiction the Basel Committee’s capital standards with or without modification;capital-in-nature instrument (資本類票據) means an instrument other than shares—(a) that is issued by an authorized institution incorporated in Hong Kong and qualifies under the Capital Rules as—(i) a CET1 capital instrument;(ii) an Additional Tier 1 capital instrument; or(iii) a Tier 2 capital instrument;(b) that is issued by an authorized institution incorporated outside Hong Kong and is capital base eligible;(c) that—(i) is issued by a company (whether incorporated in or outside Hong Kong) that is a holding company or subsidiary of an authorized institution incorporated in Hong Kong; and(ii) would qualify as a CET1 capital instrument, an Additional Tier 1 capital instrument or a Tier 2 capital instrument under the Capital Rules if the instrument were issued by the institution; or(d) that is issued by a holding company or subsidiary (whether incorporated in or outside Hong Kong) of an authorized institution incorporated outside Hong Kong and would be capital base eligible if the instrument were issued by the institution;non-capital LAC debt instrument (非資本LAC債務票據) has the meaning given by rule 2(1) of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B).(2) In this Part, an expression specified below has the meaning given by section 2(1) of the Capital Rules—Additional Tier 1 capital instrument (額外一級資本票據);CET1 capital instrument (CET1資本票據);Tier 2 capital instrument (二級資本票據). 26. Application of Part 4 This Part applies to all authorized institutions.(L.N. 169 of 2023) Division 2 Limit on Financial Facility against Security of Own Shares etc. 27. Limit on financial facility against security of own shares etc. (1) An authorized institution must not provide a financial facility against the security of any share, capital-in-nature instrument or non-capital LAC debt instrument issued by it.(2) An authorized institution must not, except with a consent given under rule 28(1), provide a financial facility against the security of any share, capital-in-nature instrument or non-capital LAC debt instrument issued by—(a) a holding company of the institution;(b) a subsidiary of the institution; or(c) a subsidiary of a holding company of the institution. 28. Consent for financial facility against security of shares etc. issued by associated company of authorized institution (1) On application by an authorized institution, the Monetary Authority may give a written consent, generally or in any particular case or class of cases, to allow the institution to provide a financial facility against the security of any share, capital-in-nature instrument or non-capital LAC debt instrument issued by—(a) a holding company of the institution;(b) a subsidiary of the institution; or(c) a subsidiary of a holding company of the institution.(2) The Monetary Authority may attach conditions to a consent given under subrule (1). Part 5 (Repealed L.N. 152 of 2025) Division 1 (Repealed L.N. 152 of 2025) 29. (Repealed L.N. 152 of 2025) 30. (Repealed L.N. 152 of 2025) Division 2 (Repealed L.N. 152 of 2025) 31. (Repealed L.N. 152 of 2025) 32. (Repealed L.N. 152 of 2025) Part 6 Interest in Land Division 1 General 33. Interpretation of Part 6 In this Part—adjusted land exposure (經調節土地風險承擔)—see rule 37(1)(b);adjusted land exposure ratio (經調節土地風險承擔比率), in relation to an authorized institution, means the ratio, expressed as a percentage, of the institution’s adjusted land exposure to the amount of the institution’s Tier 1 capital;adjusted Tier 1 capital amount (經調節一級資本額), in relation to an authorized institution, means—(a) if the amount of the cumulative gain arising from the revaluation of the institution’s self-use land in accordance with the applicable accounting standards (cumulative gain amount) is excluded from the calculation of the amount of its Tier 1 capital—the sum of the amount of its Tier 1 capital and the cumulative gain amount; or(b) if the cumulative gain amount is not excluded from the calculation of the amount of its Tier 1 capital—the amount of its Tier 1 capital;land exposure (土地風險承擔)—see rule 37(1)(a);land exposure ratio (土地風險承擔比率), in relation to an authorized institution, means the ratio, expressed as a percentage, of the institution’s land exposure to the institution’s adjusted Tier 1 capital amount;self-use land (自用土地)—see rule 37(2) and (3). 34. Application of Part 6 This Part applies to an authorized institution incorporated in Hong Kong. Division 2 Limit on Holding of Interest in Land 35. Limit on holding of interest in land Subject to (if applicable) any variation under rule 36(1), an authorized institution must at all times maintain—(a) a land exposure ratio not exceeding 50%; and(b) an adjusted land exposure ratio not exceeding 25%. 36. Monetary Authority may vary limit on holding of interest in land (1) Subject to subrules (3), (4), (5) and (6), the Monetary Authority may, by written notice served on an authorized institution, vary any or both of the limits prescribed under rule 35(a) and (b) for the institution if the Monetary Authority, after taking into account the considerations set out in subrule (2), is satisfied on reasonable grounds that it is prudent to make the variation.(2) The considerations are—(a) the risks associated with the level or concentration of the institution’s holding of interests in land;(b) any risk mitigation measures taken by the institution to manage those risks;(c) the risks associated with those measures;(d) any prevailing or reasonably anticipated market conditions that may affect the risks associated with the level or concentration of the institution’s holding of interests in land; and(e) any other factors that the Monetary Authority considers relevant.(3) If the Monetary Authority proposes to serve a notice (proposed notice) under subrule (1) on an authorized institution, the Monetary Authority must serve a draft of the notice (draft notice) on the institution.(4) A draft notice must—(a) specify—(i) the proposed variation of the limit concerned; and(ii) the circumstances pertaining to, and the grounds for, the proposed variation; and(b) contain a statement that the institution may, within 14 days (or a longer period approved by the Monetary Authority in writing in any particular case) from the date of service of the draft notice, make written representation to the Monetary Authority on any or all of the matters specified in the draft notice.(5) If an authorized institution makes any written representation in relation to a draft notice served on it, the Monetary Authority may, after considering the representation—(a) serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice;(b) serve a notice on the institution under subrule (1) in terms modified to take account of the representation on being satisfied that the modification should be made; or(c) elect not to serve a notice on the institution under subrule (1) if satisfied by the representation that the proposed notice should not be served on the institution.(6) If no representation is made by an authorized institution in relation to a draft notice served on it, the Monetary Authority may serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice.(7) A decision of the Monetary Authority under subrule (1) is a decision to which section 101B(1) of the Ordinance applies.(8) To avoid doubt—(a) the Monetary Authority may serve a draft notice on an authorized institution to supersede an earlier draft notice served on the institution; and(b) the reference to same terms in subrule (5)(a) or (6) does not include the statement mentioned in subrule (4)(b). Division 3 Determination of Land Exposure and Adjusted Land Exposure 37. Land exposure and adjusted land exposure (1) Subject to rule 38—(a) an authorized institution’s land exposure is the sum of the current book value of all interests in land held by the institution; and(b) an authorized institution’s adjusted land exposure is the institution’s land exposure minus the sum of the current book value of all interests in the institution’s self-use land held by the institution.(2) For subrule (1)(b), if any land is used for—(a) conducting an authorized institution’s business; or(b) providing housing or amenities for an authorized institution’s employees,the land is the institution’s self-use land.(3) Without limiting subrule (2), if an office of an authorized institution is situated in a part of any premises, the Monetary Authority may, for that subrule, give a written consent to allow the institution to treat the whole of the premises as being used for conducting the institution’s business. 38. Interest in land disregarded The following interests in land held by an authorized institution are not to be taken into account for determining the institution’s land exposure or adjusted land exposure—(a) any interest in land mortgaged (or otherwise provided as security) to the institution to secure a debt due to it;(b) any interest in land acquired by the institution in the course of the satisfaction of debts due to it, if—(i) the following period has not expired—(A) the period from the date of the acquisition of the interest to the date on which the interest may be disposed of at the earliest suitable opportunity, or the period of 18 months after the acquisition of the interest, whichever period expires first; or(B) a longer period approved by the Monetary Authority in writing in any particular case;

and(ii) where a longer period is approved under subparagraph (i)(B)—the institution complies with the conditions that the Monetary Authority may attach to the approval. Part 7 Single Counterparty and Group of Linked Counterparties Division 1 General 39. Interpretation of Part 7 (L.N. 152 of 2025)(1) In this Part—aggregate exposure ratio (總風險承擔比率) means an ASCE ratio or ALCGE ratio;aggregate linked counterparty group exposure (對手方相連集團總風險承擔)—see rule 47;aggregate linked counterparty group exposure ratio (對手方相連集團總風險承擔比率), in relation to an authorized institution and an LC group, means the ratio, expressed as a percentage, of the institution’s ALCG exposure to that group, to the amount of the institution’s Tier 1 capital;aggregate single counterparty exposure (單一對手方總風險承擔)—see rule 46;aggregate single counterparty exposure ratio (單一對手方總風險承擔比率), in relation to an authorized institution and a counterparty, means the ratio, expressed as a percentage, of the institution’s ASC exposure to that counterparty, to the amount of the institution’s Tier 1 capital;ALCG exposure (ALCG風險承擔) means an aggregate linked counterparty group exposure;ALCGE ratio (ALCGE比率) means an aggregate linked counterparty group exposure ratio;ASC exposure (ASC風險承擔) means an aggregate single counterparty exposure;ASCE ratio (ASCE比率) means an aggregate single counterparty exposure ratio;BSC AI means an authorized institution that uses the BSC approach to calculate its credit risk for all its non-securitization exposures; (L.N. 152 of 2025)Category A institution (A類機構) means an authorized institution designated by the Monetary Authority as such under rule 49;Category B institution (B類機構) means an authorized institution that is not a Category A institution;CCR exposure (CCR風險承擔) means a counterparty credit risk exposure;clearing-related exposure (結算關聯風險承擔), in relation to an authorized institution’s exposures to a CCP, means an exposure related to clearing activities as specified in column 2 of Table 1 in rule 51A(2); (L.N. 152 of 2025)comprehensive approach (全面方法) has the meaning given by section 51(1) of the Capital Rules;counterparty credit risk exposure (對手方信用風險承擔), in relation to an item in a book of an authorized institution, means the institution’s exposure to the counterparty credit risk arising from the item; (L.N. 152 of 2025)credit protection (信用保障), in relation to an exposure of an authorized institution, means the protection afforded to the exposure by—(a) a recognized CRM;(b) a collateral mentioned in rule 54(1)(b);(c) a credit derivative contract mentioned in rule 56(2);(d) a recognized credit risk mitigation mentioned in rule 54(3A)(a); or(e) a collateral mentioned in rule 54(3A)(b); (L.N. 152 of 2025)credit protection provider (信用保障提供者)—(a) in relation to a collateral—means the issuer of the collateral;(b) in relation to a guarantee—means the guarantor under the guarantee; or(c) in relation to a credit derivative contract—means the protection seller under the contract;credit risk mitigation covered exposure (減險措施涵蓋的風險承擔) means an exposure that is covered by a recognized CRM;credit risk mitigation uncovered portion (減險措施不涵蓋部分), in relation to a CRM covered exposure, means the portion of the exposure that is not covered by the relevant recognized CRM;CRM covered exposure (CRM涵蓋風險承擔) means a credit risk mitigation covered exposure;CRM uncovered portion (CRM不涵蓋部分) means a credit risk mitigation uncovered portion;entity (實體) includes—(a) a natural person;(b) a body of persons, whether incorporated or unincorporated;(c) a partnership; and(d) a public body;exempted sovereign entity (豁免官方實體) means—(a) a sovereign; or(b) a sovereign foreign public sector entity; (L.N. 152 of 2025)exposure (風險承擔), in relation to an item in a book of an authorized institution, means—(a) the institution’s CCR exposure arising from the item; or(b) the institution’s non-CCR exposure arising from the item;Financial Stability Board (金融穩定理事會) has the meaning given by section 2(1) of the Financial Institutions (Resolution) Ordinance (Cap. 628);FSB G-SIB list (金穩會G-SIB 列表) means the current list of global systemically important banks published by the Financial Stability Board;G-SIB-linked group (G-SIB相連集團)—see rule 42;gross jump-to-default risk amount (突發違責風險總額) has the meaning given by section 281 of the Capital Rules; (L.N. 169 of 2023)group 1 cryptoasset-related exposure (第1組加密資產關聯風險承擔) means a group 1a cryptoasset-related exposure or a group 1b cryptoasset-related exposure; (L.N. 152 of 2025)group 1a cryptoasset-related exposure (第1a組加密資產關聯風險承擔) means a cryptoasset-related exposure that relates to a group 1a cryptoasset; (L.N. 152 of 2025)group 1b cryptoasset-related exposure (第1b組加密資產關聯風險承擔) means a cryptoasset-related exposure that relates to a group 1b cryptoasset; (L.N. 152 of 2025)group 2a cryptoasset-related exposure (第2a組加密資產關聯風險承擔) means a cryptoasset-related exposure that relates to a group 2a cryptoasset; (L.N. 152 of 2025)group 2b cryptoasset-related exposure (第2b組加密資產關聯風險承擔) means a cryptoasset-related exposure that relates to a group 2b cryptoasset; (L.N. 152 of 2025)group of linked counterparties (對手方相連集團)—see rule 41;initial margin (開倉保證金) has the meaning given by section 226V(1) of the Capital Rules; (L.N. 152 of 2025)investment structure (投資結構), in relation to an authorized institution, means an item in a book of the institution that possesses a structure that gives the institution an exposure arising from the assets underlying the structure; Example— A CIS or a securitization transaction. IRB AI means an authorized institution that uses a combination of the STC approach and IRB approach to calculate its credit risk for all its non-securitization exposures; (L.N. 152 of 2025)LC group (LC集團) means a group of linked counterparties;local G-SIB (本地G-SIB) means an authorized institution designated as a global systemically important authorized institution under section 3S of the Capital Rules;local G-SIB designation (本地G-SIB指定), in relation to a local G-SIB, means the designation of it as a global systemically important authorized institution under section 3S of the Capital Rules;non-CCR exposure (非CCR風險承擔), in relation to an item in a book of an authorized institution, means the institution’s exposure arising from the item, other than a CCR exposure;non-segregated initial margin (無分隔開倉保證金), in relation to a derivative contract, means an initial margin that is not a segregated initial margin;recognized collateral (認可抵押品)—(a) in relation to a BSC AI—means a collateral that meets the requirements of section 77(1)(a) of the Capital Rules; and (L.N. 152 of 2025)(b) in relation to an IRB AI or an STC AI— (L.N. 152 of 2025)(i) if the institution uses the simple approach in its treatment of recognized collateral in accordance with section 78 of the Capital Rules—means a collateral that meets the requirements of section 77(1)(a) of the Capital Rules; or(ii) if the institution uses the comprehensive approach in its treatment of recognized collateral in accordance with section 78 of the Capital Rules—means a collateral that meets the requirements of section 77(1)(b) of the Capital Rules; (L.N. 169 of 2023)recognized credit derivative contract (認可信用衍生工具合約), in relation to an exposure of an authorized institution, has the meaning given by section 51(1) of the Capital Rules, as if sections 99 and 99B of the Capital Rules were applicable to the institution, but does not include a credit-linked note; (L.N. 169 of 2023)recognized credit risk mitigation (認可減險措施) means—(a) a recognized netting done under a valid bilateral netting agreement;(b) a recognized collateral;(c) a recognized guarantee;(d) a recognized credit derivative contract; or(e) a credit-linked note;recognized CRM (認可CRM) means a recognized credit risk mitigation;recognized guarantee (認可擔保), in relation to an exposure of an authorized institution, has the meaning given by section 51(1) of the Capital Rules, as if section 98 of the Capital Rules were applicable to the institution;segregated initial margin (分隔開倉保證金), in relation to a derivative contract, means an initial margin that is segregated from the collecting party’s proprietary assets—(a) by placing the collateral constituting the margin with a third-party custodian; or (L.N. 152 of 2025)(b) through other legally valid arrangements,to protect the collateral from the default or insolvency of the collecting party;simple approach (簡易方法) has the meaning given by section 51(1) of the Capital Rules;STC AI means an authorized institution that uses the STC approach to calculate its credit risk for all its non-securitization exposures. (L.N. 152 of 2025)(L.N. 169 of 2023; L.N. 152 of 2025)(2) In this Part, an expression specified below has the meaning given by section 2(1) of the Capital Rules—affiliate (附屬成員);bank (銀行);BSC approach (BSC計算法);capital adequacy ratio (資本充足比率);CCF; (L.N. 169 of 2023)CCP;counterparty credit risk (對手方信用風險);credit default swap (信用違責掉期);credit event (信用事件);credit-linked note (信用掛鈎票據);credit risk (信用風險);currency mismatch (貨幣錯配);default fund contribution (違責基金承擔);delivery-versus-payment basis (貨銀對付形式); (L.N. 169 of 2023)financial sector entity (金融業實體);group 1a cryptoasset (第1a組加密資產); (L.N. 152 of 2025)group 1b cryptoasset (第1b組加密資產); (L.N. 152 of 2025)group 2a cryptoasset (第2a組加密資產); (L.N. 152 of 2025)group 2b cryptoasset (第2b組加密資產); (L.N. 152 of 2025)group of companies (公司集團);guarantee (擔保);haircut (扣減);IMA; (L.N. 169 of 2023)incorporated (成立為法團);internal model (內部模式); (L.N. 169 of 2023)IPO; (L.N. 169 of 2023)IRB approach (IRB計算法);loss given default (違責損失率); (L.N. 169 of 2023)market risk (市場風險); (L.N. 152 of 2025)mark-to-market (按市價計值);non-securitization exposure (非證券化類別風險承擔); (L.N. 169 of 2023)notional amount (名義數額);nth-to-default credit derivative contract (nth違責者信用衍生工具合約);obligor (承擔義務人);positive current exposure (現行風險承擔正數); (L.N. 169 of 2023)public sector entity (公營單位);qualifying CCP (合資格CCP);recognized netting (認可淨額計算);reference entity (參照實體);reference obligation (參照義務);regulatory capital (監管資本); (L.N. 152 of 2025)risk-weighted amount (風險加權數額);risk-weighted amount for credit risk (信用風險的風險加權數額); (L.N. 169 of 2023)SA-CCR approach (SA-CCR計算法); (L.N. 169 of 2023)sovereign (官方實體);sovereign foreign public sector entity (屬官方實體的非本地公營單位);specific provisions (特定準備金);standard supervisory haircut (標準監管扣減);STC approach (STC 計算法);STM approach (STM 計算法); (L.N. 169 of 2023)synthetic securitization transaction (合成證券化交易);traditional asset (傳統資產); (L.N. 152 of 2025)underlying exposures (組成項目);unsegregated collateral (無隔離抵押品); (L.N. 169 of 2023)valid bilateral netting agreement (有效雙邊淨額結算協議).(L.N. 169 of 2023; L.N. 152 of 2025)(3) (Repealed L.N. 152 of 2025) 40. Applicable method, approach, provision, etc. in Capital Rules A reference to a provision taking effect as if—(a) a particular method or approach specified in the Capital Rules; or(b) a provision or group of provisions of the Capital Rules,were applicable to an authorized institution includes the case where that method, approach, provision or group of provisions is actually applicable to the institution. 41. Group of linked counterparties (LC group) (1) For this Part, subject to subrules (3), (4) and (5)—(a) for a counterparty of an authorized institution (reference counterparty), another counterparty of the institution is a linked counterparty of the reference counterparty if the other counterparty is an entity specified in subrule (2); and(b) the reference counterparty and all of its linked counterparties are collectively treated as an LC group of the institution.(2) The other counterparty is one that is—(a) an entity that controls the reference counterparty;(b) an entity that is controlled by the entity that controls the reference counterparty;(c) an entity that is controlled by the reference counterparty;(d) an entity that is not an entity specified in paragraph (a), (b) or (c), but is economically dependent on the reference counterparty or an entity specified in paragraph (a), (b) or (c);(e) an entity that is controlled by an entity specified in paragraph (d); or(f) any other entity that—(i) controls; and(ii) is economically dependent on,an entity specified in paragraph (d).(3) For subrule (1), if the reference counterparty is a counterparty in relation to which the institution’s ASCE ratio does not exceed 5% or is an exempted sovereign entity, the institution, in determining its ASC exposure to the LC group (by reference to the reference counterparty), may treat any of the following entities as not being in the LC group—(a) an entity specified in subrule (2)(d) that is economically dependent on the reference counterparty;(b) an entity specified in subrule (2)(e) that is controlled by an entity specified in paragraph (a);(c) an entity specified in subrule (2)(f) that controls and is economically dependent on an entity specified in paragraph (a).(4) For subrule (1), if a counterparty of an authorized institution (counterparty A) is a linked counterparty of the reference counterparty by virtue of subrule (2)(a), (b) or (c) and the institution’s ASCE ratio in relation to the counterparty A does not exceed 5%, the institution, in determining its ASC exposure to the LC group (by reference to the reference counterparty), may treat any of the following entities as not being in the LC group—(a) an entity specified in subrule (2)(d) that is economically dependent on the counterparty A;(b) an entity specified in subrule (2)(e) that is controlled by an entity specified in paragraph (a);(c) an entity specified in subrule (2)(f) that controls and is economically dependent on an entity specified in paragraph (a).(5) For subrule (1), if 2 or more counterparties of an authorized institution—(a) are controlled by, or economically dependent on, an exempted sovereign entity, a specified sovereign-owned entity or The Financial Secretary Incorporated established under the Financial Secretary Incorporation Ordinance (Cap. 1015); and(b) are otherwise not in an LC group under subrule (1),regardless of whether the exempted sovereign entity, the specified sovereign-owned entity or The Financial Secretary Incorporated is a counterparty of the institution, the counterparties are treated as not being in an LC group of the institution.(6) For this rule, subject to subrule (7), an entity (subordinate entity) is treated as being controlled by another entity (parent entity) if—(a) the parent entity owns more than 50% of the voting rights in the subordinate entity;(b) the parent entity has control of a majority of the voting rights in the subordinate entity under an agreement with other shareholders (or similar holders of voting rights);(c) the parent entity has the right to appoint or remove a majority of the members of the subordinate entity’s board of directors (or a similar governing body);(d) a majority of the members of the subordinate entity’s board of directors (or a similar governing body) have been appointed solely as a result of the parent entity exercising its voting rights; or(e) the parent entity has the power, under a contract or otherwise, to exercise a controlling influence over the management or policies of the subordinate entity.(7) For subrule (6), in so far as a parent entity falls within subrule (6)(a), (b), (c), (d) or (e), by virtue of its fiduciary capacity on behalf of a non-anonymous beneficiary—(a) the subordinate entity is not to be treated as being controlled by the parent entity; and(b) to avoid doubt, the subordinate entity is treated as being controlled by the beneficiary if, by virtue of the beneficiary’s beneficial interest—(i) the beneficiary owns more than 50% of the voting rights in the subordinate entity;(ii) the beneficiary has control of a majority of the voting rights in the subordinate entity under an agreement with other shareholders (or similar holders of voting rights);(iii) the beneficiary has the right to appoint or remove a majority of the members of the subordinate entity’s board of directors (or a similar governing body);(iv) a majority of the members of the subordinate entity’s board of directors (or a similar governing body) have been appointed solely as a result of the beneficiary exercising its voting rights; or(v) the beneficiary has the power, under a contract or otherwise, to exercise a controlling influence over the management or policies of the subordinate entity.(8) For this rule, an entity (Entity A) is economically dependent on another entity (Entity B) if they are connected in a way that if Entity B were to encounter financial problems (in particular funding or repayment difficulties), Entity A would also be likely to encounter financial problems (in particular funding or repayment difficulties).(9) In this rule—specified sovereign-owned entity (指明官方擁有實體) means an entity that is specified in Schedule 2. 42. G-SIB-linked group (1) For this Part, an LC group is a G-SIB-linked group if an entity in the group is—(a) an international G-SIB; or(b) a local G-SIB.(2) The group becomes a G-SIB-linked group when—(a) if subrule (1)(a) applies—the name representing the relevant entity or group of companies becomes included in the FSB G-SIB list; or(b) if subrule (1)(b) applies—the relevant local G-SIB designation takes effect.(3) To avoid doubt, if more than 1 entity in an LC group is an international G-SIB or a local G-SIB, the group is treated as having become a G-SIB-linked group when the group first had an entity in it becoming an international G-SIB or a local G-SIB.(4) In this rule—international G-SIB (國際G-SIB) means—(a) an entity that is in the FSB G-SIB list; or(b) a company that is a member of a group of companies—(i) that is in the FSB G-SIB list; or(ii) any member of which is in the FSB G-SIB list. 43. Application of Part 7 This Part applies to an authorized institution incorporated in Hong Kong. Division 2 Limit on Exposure to Single Counterparty and Group of Linked Counterparties 44. Limit on exposure to single counterparty and group of linked counterparties (1) Subject to subrule (2) and (if applicable) any variation under rule 45(1), an authorized institution must at all times maintain—(a) in relation to a counterparty of the institution—an ASCE ratio not exceeding 25%; and(b) in relation to an LC group of the institution—an ALCGE ratio not exceeding 25%.(2) Subject to subrules (3) and (4) and (if applicable) any variation under rule 45(1), a local G-SIB must at all times maintain—(a) in relation to a counterparty of the institution that is in a G-SIB-linked group—an ASCE ratio not exceeding 15%; and(b) in relation to an LC group of the institution that is a G-SIB-linked group—an ALCGE ratio not exceeding 15%.(3) Subrule (2) only applies to a local G-SIB on and after the earlier of the following dates—(a) the first anniversary date of the local G-SIB date;(b) a date notified by the Monetary Authority in writing to the local G-SIB, which date must not fall within 6 months beginning on the local G-SIB date.(4) Subrule (2) only applies in relation to a G-SIB-linked group or in relation to a counterparty in such a group on and after the earlier of the following dates—(a) the first anniversary date of the G-SIB date;(b) a date notified by the Monetary Authority in writing to the local G-SIB, which date must not fall within 6 months beginning on the G-SIB date.(5) In this rule—G-SIB date (G-SIB日期), in relation to an LC group of an authorized institution that is a G-SIB-linked group or in relation to a counterparty in such a group—(a) if the group becomes a G-SIB-linked group on a date on or after 1 July 2019—means the date on which it becomes a G-SIB-linked group; and(b) if, immediately before 1 July 2019, the group was within the meaning of G-SIB-linked group as if these Rules had come into operation at that time—means 1 July 2019;local G-SIB date (本地G-SIB日期), in relation to a local G-SIB—(a) means the effective date of its local G-SIB designation; and(b) if the effective date of its local G-SIB designation was before 1 July 2019—means 1 July 2019. 45. Monetary Authority may vary limit prescribed under rule 44 (1) Subject to subrules (3), (4), (5) and (6), the Monetary Authority may, by written notice served on an authorized institution, vary any or all of the following limits for the institution—(a) the limits prescribed under rule 44(1)(a) and (2)(a), whether in relation to a particular counterparty, a class of counterparties or all counterparties of the institution;(b) the limits prescribed under rule 44(1)(b) and (2)(b), whether in relation to a particular LC group, a class of LC groups or all LC groups of the institution,if the Monetary Authority, after taking into account the considerations set out in subrule (2), is satisfied on reasonable grounds that it is prudent to make the variation.(2) The considerations are—(a) the risks associated with the level or concentration of the institution’s exposures to 1 or more counterparties or LC groups;(b) any risk mitigation measures taken by the institution to manage those risks;(c) the risks associated with those measures; and(d) any other factors that the Monetary Authority considers relevant.(3) If the Monetary Authority proposes to serve a notice (proposed notice) under subrule (1) on an authorized institution, the Monetary Authority must serve a draft of the notice (draft notice) on the institution.(4) A draft notice must—(a) specify—(i) the proposed variation of the limit concerned; and(ii) the circumstances pertaining to, and the grounds for, the proposed variation; and(b) contain a statement that the institution may, within 14 days (or a longer period approved by the Monetary Authority in writing in any particular case) from the date of service of the draft notice, make written representation to the Monetary Authority on any or all of the matters specified in the draft notice.(5) If an authorized institution makes any written representation in relation to a draft notice served on it, the Monetary Authority may, after considering the representation—(a) serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice;(b) serve a notice on the institution under subrule (1) in terms modified to take account of the representation on being satisfied that the modification should be made; or(c) elect not to serve a notice on the institution under subrule (1) if satisfied by the representation that the proposed notice should not be served on the institution.(6) If no representation is made by an authorized institution in relation to a draft notice served on it, the Monetary Authority may serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice.(7) A decision of the Monetary Authority under subrule (1) is a decision to which section 101B(1) of the Ordinance applies.(8) To avoid doubt—(a) the Monetary Authority may serve a draft notice on an authorized institution to supersede an earlier draft notice served on the institution; and(b) the reference to same terms in subrule (5)(a) or (6) does not include the statement mentioned in subrule (4)(b). Division 3 Determination of ASC Exposure and ALCG Exposure Subdivision 1 ASC Exposure and ALCG Exposure 46. Aggregate single counterparty exposure (ASC exposure) Subject to rule 48 and Subdivisions 2, 3 and 4, an authorized institution’s ASC exposure to a counterparty of the institution is determined by adding—(a) the sum of the value of all of the institution’s CCR exposures (other than those falling within paragraph (c)) to the counterparty (valued in accordance with Division 4), arising from derivative contracts and securities financing transactions entered into by the institution with the counterparty;(b) the sum of the value of all of the institution’s non-CCR exposures (other than those falling within paragraph (c)) to the counterparty (valued in accordance with Division 5), arising from items in the institution’s books; and(c) the sum of the value of all of the institution’s cryptoasset-related exposures to the counterparty (valued in accordance with Division 5A). (L.N. 152 of 2025)(L.N. 152 of 2025) 47. Aggregate linked counterparty group exposure (ALCG exposure) (1) Subject to subrules (2) and (4), an authorized institution’s ALCG exposure to an LC group of the institution is the sum of the ASC exposure to all counterparties of the institution in the group.(2) The institution must exclude the value of a clearing-related exposure to a CCP from the institution’s ALCG exposure to an LC group of which the CCP is a member. (L.N. 152 of 2025)(3) (Repealed L.N. 152 of 2025)(4) If the same portion of an exposure of an authorized institution is included in the institution’s ASC exposure to 2 or more entities in an LC group, the exposure is to be counted once only in determining the institution’s ALCG exposure to the group. 48. Exposure disregarded (1) The following exposures of an authorized institution are not to be taken into account for determining an ASC exposure or an ALCG exposure—(a) an exposure to an affiliate of the institution, if the institution and the affiliate are accounted for on a full basis in the consolidated financial statements of the holding company of the group of companies to which they belong, for the purposes of and in compliance with—(i) the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants;(ii) the International Financial Reporting Standards issued by the International Accounting Standards Board; or(iii) if the holding company is incorporated in a place outside Hong Kong and is not a re-domiciled entity—the standards of accounting practices applicable to the holding company in that place; (14 of 2025 s. 193)(b) an exposure (other than a cryptoasset-related exposure) in the institution’s trading book that is not associated with the credit risk or default risk of a counterparty (for example, exposure to commodities and currencies); (L.N. 152 of 2025)(ba) a cryptoasset-related exposure that is not associated with the credit risk or default risk of a counterparty; (L.N. 152 of 2025)(c) an exposure to an exempted sovereign entity (including, in relation to the Government, the holding of Exchange Fund Bills and Exchange Fund Notes for the account of the Exchange Fund);(d) an exposure arising from any share capital, debt securities, cryptoasset or investment structure held as security for a financial facility provided by the institution, except for a collateral or recognized collateral to which rule 54(2)(a)(ii) or (iii) applies directly, or indirectly by the application of rule 54(3A); (L.N. 152 of 2025)(e) (Repealed L.N. 169 of 2023)(f) (Repealed L.N. 169 of 2023)(g) an exposure arising from—(i) an indemnity given by the institution to an entity to protect the entity against any damages which may be incurred by the entity as a result of the entity registering a transfer of shares under the following circumstances—(A) the instrument by means of which the transfer has been effected, or purports to have been effected, has been provided, or purports to have been provided, by a subsidiary of the institution;(B) the authenticating signature on the instrument has been imprinted on it by a machine used by the subsidiary to imprint that signature on such instruments; and(C) that signature was unlawfully so imprinted on the instrument; or(ii) a financial guarantee given by the institution to the entity in respect of any similar indemnity given by the subsidiary to the entity;(h) an exposure to the Housing Authority (established under section 3 of the Housing Ordinance (Cap. 283)), arising from a guarantee given by the Housing Authority for the Home Ownership Scheme or Private Sector Participation Scheme;(i) an exposure to any of the following companies, arising from the obligations placed on the company for the Mortgage Insurance Programme set up by The Hong Kong Mortgage Corporation Limited—(i) The Hong Kong Mortgage Corporation Limited;(ii) a subsidiary of The Hong Kong Mortgage Corporation Limited;(j) an exposure to any of the following companies, arising from the obligations placed on the company for the Guaranteed Mortgage-Backed Pass-Through Securitisation Programme set up by The Hong Kong Mortgage Corporation Limited—(i) The Hong Kong Mortgage Corporation Limited;(ii) a company that issues mortgage-backed securities in connection with the Programme;(k) an exposure to a bank that meets both of the following descriptions—(i) the exposure was incurred at a location on a particular calendar date by reference to the time zone of that location;(ii) that calendar date has not ended at that location;(l) subject to rule 48A, an exposure of the institution under the following circumstances— (L.N. 169 of 2023)(i) the institution acts as a receiving bank in an IPO; and(ii) the exposure is incurred to another authorized institution for placing the subscription monies in respect of the IPO received by the receiving bank to the interbank market, including by means of a swap contract in relation to foreign exchanges; (L.N. 169 of 2023)(la) subject to rule 48A, an exposure of the institution under the following circumstances—(i) the institution acts as a designated bank in an IPO; and(ii) the exposure is incurred to another authorized institution for placing the subscription monies in respect of the IPO received by the designated bank to the interbank market, including by means of a swap contract in relation to foreign exchanges; (L.N. 169 of 2023)(m) a clearing-related exposure (whether a CCR exposure or a non-CCR exposure) to a qualifying CCP;(ma) an exposure that falls within item 10 in the Table in section 1 of Schedule 6 to the Capital Rules (exempt commitments); (L.N. 169 of 2023)(n) an exposure that is specified in a consent given under subrule (2), if the conditions attached to the consent under subrule (3)(b) are complied with.(2) The Monetary Authority may give a written consent to allow an exposure or a class of exposures not to be taken into account for determining an ASC exposure or an ALCG exposure, if the Monetary Authority considers that it is reasonable to do so, having regard to—(a) the nature of, and the risks associated with, the exposure or class of exposures;(b) any risk mitigation measures taken by the institution to manage those risks;(c) the risks associated with those measures; and(d) any other factors that the Monetary Authority considers relevant.(3) The Monetary Authority may—(a) give a written consent under subrule (2) to an authorized institution or a class of authorized institutions; and(b) attach conditions to the consent.(4) In this rule—designated bank (指定銀行), in relation to an IPO conducted in Hong Kong, means an authorized institution that effects the money settlement obligation of a subscriber of the IPO (or an agent of such a subscriber) with a receiving bank of the IPO; (L.N. 169 of 2023)receiving bank (收款銀行), in relation to an IPO conducted in Hong Kong, means an authorized institution appointed by the issuer of the IPO to—(a) receive subscription monies; and(b) provide other services relating to the IPO such as returning subscription monies if the IPO is cancelled after money settlement. (L.N. 169 of 2023) 48A. Provisions supplementary to rule 48(1)(l) and (la) (L.N. 169 of 2023)(1) The Monetary Authority may announce, in accordance with subrule (2), a day on which rule 48(1)(l) or (la), or both, ceases to apply. (L.N. 169 of 2023)(2) An announcement under subrule (1) must be made by the Monetary Authority by—(a) giving written notice to all authorized institutions; and(b) posting a notice on the Monetary Authority’s website.(L.N. 169 of 2023) Subdivision 2 Credit Risk Mitigation 48B. Credit risk mitigation—general (1) Subject to subrules (1A), (2), (3) and (4), an authorized institution must reduce the value of an exposure of the institution by taking into account the effect of a recognized CRM in the calculation of the institution’s ASC exposure to a counterparty in accordance with applicable requirement set out in this Subdivision and Division 6 if the institution has taken into account the effect of the same form of recognized credit risk mitigation (as defined by section 2(1) of the Capital Rules) in its calculation of the risk-weighted amount for credit risk in respect of the exposure under the Capital Rules. (L.N. 152 of 2025)(1A) In the case of a non-CCR exposure that is a cryptoasset-related exposure valued in accordance with Division 5A, an authorized institution must not, for subrule (1), take into account the effect of any recognized CRM applicable to the exposure that has already been taken into account in its calculation of the credit risk of the exposure under that Division. (L.N. 152 of 2025)(2) In the case of a CCR exposure in respect of derivative contracts or SFTs valued in accordance with Division 4 or 5A, as the case requires, an authorized institution must not, for subrule (1), take into account the effect of any recognized CRM applicable to the exposure that has already been taken into account in its calculation of the amount of the default risk exposure of the contract or transaction under Part 6A or 12, or both Parts, as the case requires, of the Capital Rules. (L.N. 152 of 2025)(3) In the case of a CCR exposure in respect of SFTs valued in accordance with rule 60, an IRB AI or an STC AI must, for subrule (1), take into account the recognized collateral by using the comprehensive approach to the treatment of recognized collateral. (L.N. 152 of 2025)(4) An authorized institution must not recognize the effect of a recognized CRM if the institution has not taken into account the effect of the same form of recognized credit risk mitigation (as defined by section 2(1) of the Capital Rules) in its calculation of the risk-weighted amount for credit risk in respect of the exposure under the Capital Rules.(L.N. 169 of 2023) 49. Designation of Category A institution (1) The Monetary Authority may, by written notice to an authorized institution, designate the institution as a Category A institution.(2) The designation may be made—(a) on the Monetary Authority’s own volition, if the Monetary Authority is satisfied that the institution—(i) is internationally active; or(ii) is significant to the general stability and effective working of the banking system in Hong Kong; or(b) on application by the institution, if the Monetary Authority is satisfied that the institution has the capacity (including systems and resources) to determine an ASC exposure or an ALCG exposure taking into account the effect of credit risk mitigation applicable to a Category A institution.(3) The designation takes effect—(a) on the date specified in the notice; or(b) when the event specified in the notice occurs.(4) Despite subrules (1) and (2), the Monetary Authority may decide not to designate an authorized institution as a Category A institution under the following circumstances—(a) the institution’s particular circumstances provide reasonable justification for it not to be designated as a Category A institution; and(b) it would not materially prejudice the institution’s calculation of an aggregate exposure ratio under this Part if the designation were not made.(5) If—(a) an authorized institution has been designated as a Category A institution; and(b) the Monetary Authority is satisfied that had the designation not been made, the Monetary Authority would not make the designation,the Monetary Authority may, on the Monetary Authority’s own volition or on application by the institution, by written notice to the institution, revoke the designation.(6) The revocation takes effect—(a) on the date specified in the notice; or(b) when the event specified in the notice occurs.(7) A decision made by the Monetary Authority under subrule (1) or (5) is a decision to which section 101B(1) of the Ordinance applies. 50. Credit risk mitigation—Category A institution A Category A institution must adjust the value of a CRM covered exposure of the institution to the value of the CRM uncovered portion of the exposure in accordance with Division 6.(L.N. 169 of 2023) 51. Credit risk mitigation—Category B institution A Category B institution must adjust the value of each of the following exposures of the institution to the value of the CRM uncovered portion of the exposure in accordance with Division 6—(a) a CRM covered exposure that is a CCR exposure;(b) a CRM covered exposure that is a non-CCR exposure, if the recognized CRM that covers the exposure is—(i) a recognized netting done under a valid bilateral netting agreement; or(ii) a recognized collateral that is a cash deposit.(L.N. 169 of 2023) Subdivision 3 Specific Circumstances 51A. Exposures to CCPs (1) An authorized institution must, for the purposes of determining its ASC exposure to a CCP—(a) if the CCP is a qualifying CCP—(i) disregard all clearing-related exposures of the institution to the CCP in accordance with rule 48(1)(m); and(ii) value any other exposure of the institution to the CCP in accordance with Division 4 or 5, as the case requires; or(b) if the CCP is a non-qualifying CCP—(i) value all clearing-related exposures of the institution to the CCP in accordance with subrule (2);(ii) value any other exposure of the institution to the CCP in accordance with Division 4 or 5, as the case requires; and(iii) calculate the ASC exposure to the CCP as the sum of the value of all of the institution’s exposures to the CCP determined under subparagraphs (i) and (ii).(2) A clearing-related exposure of an authorized institution to a CCP specified in column 2 of an item in Table 1 must be valued by using the method or at the amount specified in column 3 of that item.Table 1 Column 1 Column 2 Column 3 Item Clearing-related exposure Method or amount 1. Trade exposure Division 4 of Part 7 2. Segregated initial margin $0 3. Non-segregated initial margin Nominal amount of initial margin posted 4. Funded default fund contribution Nominal amount of the funded contribution 5. Unfunded default fund contribution $0 6. Holding of shares in the CCP Nominal amount of the shares (3) An authorized institution must determine the counterparty to which a clearing-related exposure must be assigned in accordance with Division 4 of Part 6A of the Capital Rules.(4) In this rule—non-qualifying CCP (不合資格CCP) has the meaning given by section 226V(1) of the Capital Rules;trade exposure (交易風險承擔) means a default risk exposure of an authorized institution in respect of which Division 4 of Part 6A of the Capital Rules applies.(L.N. 152 of 2025) 52. Investment with additional risk factor (1) Subrule (2) applies if, in relation to an authorized institution, an entity—(a) is the fund manager of 1 or more CISs, in relation to each of which the institution has an exposure arising from its holding of interests under the CIS (except where the custodian of the assets in the scheme is a separate legal entity);(b) is the liquidity support provider to 1 or more asset-backed commercial paper programmes, in relation to each of which the institution has an exposure arising from its holding of interests under the programme;(c) is the sponsor of 1 or more asset-backed commercial paper programmes, in relation to each of which the institution has an exposure arising from its holding of interests under the programme;(d) is the credit protection provider (through a credit default swap or guarantee) of 1 or more synthetic securitization transactions, in relation to each of which the institution has an exposure arising from its holding of interests under the transaction; or(e) plays any other role which represents a common risk factor for 1 or more CISs, asset-backed commercial paper programmes, synthetic securitization transactions or similar items, in relation to each of which the institution has an exposure arising from its holding of interests under the CIS, asset-backed commercial paper programme, synthetic securitization transaction or similar item.(2) The institution—(a) is treated as having an exposure to the entity arising from each of the holdings mentioned in subrule (1); and(b) must, for determining its ASC exposure to the entity—(i) value each of the exposures as equivalent to the current book value of the relevant holding; and(ii) include all of the exposures as non-CCR exposures of the institution.(3) In this rule—asset-backed commercial paper programme (有資產支持的商業票據計劃) has the meaning given by section 227(1) of the Capital Rules;liquidity facility (流動資金融通) has the meaning given by section 227(1) of the Capital Rules, with the modification that the meaning is in relation to any entity instead of only in relation to an authorized institution;liquidity support provider (流動資金支援者) means a party that provides liquidity facilities. 53. Protection seller and protection buyer of credit derivative contract If—(a) an authorized institution enters into a credit derivative contract as a protection seller; and(b) the fair value of the contract is positive from the perspective of the institution (that is, the present value of contracted but not yet paid periodical payment from the protection buyer exceeds the present value of the expected obligation of the protection seller under the contract),the institution must, for determining its ASC exposure to the protection buyer under this Part, include the positive value in calculating the sum of the value of all of the institution’s CCR exposures to the protection buyer. 54. Credit protection provider (1) Subrule (2) applies if an authorized institution—(a) has offset an exposure in the trading book of the institution against a credit derivative contract mentioned in rule 56(2);(b) has taken into account the value of any collateral in valuing a CCR exposure under rule 59 or 60;(c) has adjusted the value of a CRM covered exposure to the value of the CRM uncovered portion of the exposure in accordance with Division 6; or (L.N. 152 of 2025)(d) has an exposure to an exempted sovereign entity that is protected by a recognized credit derivative contract and the effect of that contract would have been taken into account in the institution’s calculation of its ASC exposure to the exempted sovereign entity under rule 56(2) or Division 6, as the case requires, had the exposure to the exempted sovereign entity not been disregarded under rule 48(1)(c). (L.N. 152 of 2025)(2) Subject to subrule (3), the institution must include a new exposure to the relevant credit protection provider as follows— (L.N. 169 of 2023)(a) whether the exposure mentioned in subrule (1) (protected exposure) is a CCR exposure or a non-CCR exposure—(i) if the credit protection is in the form of a recognized credit derivative contract or a credit derivative contract mentioned in rule 56(2) and the contract is not a credit default swap mentioned in paragraph (b)—the amount of the reduction in the value of the protected exposure must be included in determining the institution’s ASC exposure to the counterparty of the contract;(ii) if the value of the credit protection, that is in the form of a collateral, is taken into account in valuing the protected exposure under rule 59 or 60—the value so taken into account must be included in determining the institution’s ASC exposure to the issuer of the collateral;(iii) if the credit protection is in the form of a recognized collateral—the amount of the reduction in the value of the protected exposure must be included in determining the institution’s ASC exposure to the issuer of the collateral;(iv) if the credit protection is in the form of a recognized guarantee—the amount of the reduction in the value of the protected exposure must be included in determining the institution’s ASC exposure to the guarantor under the guarantee;(b) if the credit protection is in the form of a credit derivative contract mentioned in rule 56(2) that is a credit default swap, and either the counterparty or the reference entity of the contract is not a financial sector entity—an amount equivalent to the default risk exposure to the counterparty calculated as mentioned in rule 59 must be included in determining the institution’s ASC exposure to the counterparty of the contract.(3) If the recognized credit derivative contract is an internal risk transfer recognized under section 99B of the Capital Rules, a protection provider under the external hedge referred to in that section is to be regarded as the relevant credit protection provider. (L.N. 169 of 2023)(3A) Subrule (2)(a) applies, with all necessary modifications, if the institution has taken into account—(a) the effect of any form of recognized credit risk mitigation (as defined by section 2(1) of the Capital Rules) under rule 77C(2)(b), 77D(2)(d), 77E(2)(b) or 77H(2)(b); or(b) the value of any collateral in valuing a CCR exposure under rule 77G. (L.N. 152 of 2025)(4) In this rule—internal risk transfer (內部風險轉移) has the meaning given by section 99B(4) of the Capital Rules. (L.N. 169 of 2023) Subdivision 4 Offsetting and Deduction 55. General For determining an ASC exposure under this Part, the valuation of an exposure may be subject to offsetting and deduction in accordance with this Subdivision. 56. Offsetting of positions (1) A long position and a short position with respect to the same counterparty in an authorized institution’s trading book may be offset as follows—(a) a long position and a short position in the same issue of securities (including securities in the form of cryptoassets) in the trading book may be offset;(b) a long position and a short position in different issues of securities (including securities in the form of cryptoassets) in the trading book issued by the same counterparty may be offset, if the long position is senior, or of equivalent seniority, to the short position. (L.N. 152 of 2025)(2) An exposure arising from the holding of securities issued by a counterparty in an authorized institution’s trading book may be offset against a credit derivative contract, in the institution’s trading book, entered into by the institution to hedge the exposure if the position being hedged is senior, or of equivalent seniority, to the reference obligation of the credit derivative contract.(3) For subrule (1)(a), 2 issues are treated as the same issue if the following (as applicable) are identical—(a) the issuer;(b) coupon;(c) currency;(d) maturity;(e) priority to claim on the issuer’s income or assets.(4) For determining the relative seniority of a long position and a short position in different issues of securities under subrules (1)(b) and (2)—(a) the securities may be allocated into broad buckets of different degrees of seniority (including, for example, “equity”, “subordinated debt” or “senior debt”);(b) if the institution chooses to allocate securities in the way mentioned in paragraph (a), the allocation must be applied consistently across the institution’s entire portfolio of positions in its trading book.(5) A long position with respect to a counterparty in an authorized institution’s banking book may be offset against a short position in an option contract with respect to the counterparty in its banking book.(6) The following is taken to be zero—(a) a net short position after any offsetting mentioned in subrule (1)(a) or (b), (2) or (5);(b) a short position not used to offset a long position as mentioned in subrule (1)(a) or (b), (2) or (5).(7) To avoid doubt, an authorized institution may choose not to do any offsetting mentioned in subrule (1)(a) or (b), (2) or (5). 57. Deduction (1) In valuing an exposure of an authorized institution, the following amounts are to be deducted—(a) the amount that is deducted in determining the capital base of the institution in accordance with Part 3 of the Capital Rules; (L.N.

152 of 2025)(b) any specific provision made in respect of the exposure, that is not yet considered in valuing the exposure;(c) for an exposure of a Category B institution covered by a recognized collateral, or a recognized guarantee, issued by an exempted sovereign entity—the amount so covered; (L.N. 152 of 2025)(d) for an exposure covered by a letter of comfort where—(i) the letter of comfort is approved by the Monetary Authority; and(ii) the conditions (if any) attached to the approval, whether generally or in any particular case or class of cases, are complied with—the amount so covered;(e) for an exposure that has been written off in the books of the institution—the amount written off.(2) If more than 1 deduction under subrule (1)(a), (b), (c), (d) or (e) corresponds to the same portion of an exposure, the institution—(a) must apply only 1 deduction in valuing the exposure; but(b) may choose to use any 1 of paragraphs (a), (b), (c), (d) and (e) of subrule (1). Division 4 Valuation of CCR Exposure 58. Application of Division 4 This Division applies to the valuation of a CCR exposure of an authorized institution to a counterparty for determining the institution’s ASC exposure to the counterparty. 59. Derivative contract A CCR exposure arising from a derivative contract entered into by an authorized institution with a counterparty is valued at the amount of the default risk exposure calculated—(a) if the institution does not use any internal model based approach to calculate the amount of the default risk exposure of its derivative contracts for calculating its capital adequacy ratio under the Capital Rules—by using the approach or method under Part 6A of those Rules that the institution currently uses for that calculation; or(b) if the institution uses any internal model based approach to calculate the amount of the default risk exposure of its derivative contracts for calculating its capital adequacy ratio under the Capital Rules—by using the SA-CCR approach.(L.N. 169 of 2023) 60. SFT A CCR exposure arising from an SFT entered into by an authorized institution with a counterparty is valued at the amount of the default risk exposure calculated by using the methods set out in Division 2B of Part 6A of the Capital Rules (other than the internal model based approach set out in section 226ML of those Rules).(L.N. 169 of 2023) Division 5 Valuation of Non-CCR Exposure Subdivision 1 Application of Division 5 61. Application of Division 5 This Division applies to the valuation of a non-CCR exposure of an authorized institution to a counterparty for determining the institution’s ASC exposure to the counterparty. Subdivision 2 Non-CCR Exposure (Banking Book) 62. Application of Subdivision 2 This Subdivision applies to a non-CCR exposure arising from an item in an authorized institution’s banking book. 63. General—current book value A non-CCR exposure, arising from an item in an authorized institution’s banking book, must be valued at the item’s current book value, unless this Subdivision or Subdivision 3 contains a provision that specifically provides for the valuation of the exposure. 64. (Repealed L.N. 152 of 2025) 65. Off-balance sheet exposure other than default risk exposure or exposure arising from unsegregated collateral (1) Subject to subrule (2), a non-CCR exposure that is an off-balance sheet exposure specified in column 2 of the Table in section 1 of Schedule 6 to the Capital Rules must be valued at the credit equivalent amount of the exposure calculated in accordance with—(a) if an authorized institution is a BSC AI—section 118(1) of the Capital Rules; or(b) if an authorized institution is an IRB AI or an STC AI—section 71(1) of the Capital Rules. (L.N. 152 of 2025)(2) For calculating the credit equivalent amount of an off-balance sheet exposure under subrule (1)—(a) the applicable CCF specified in column 3 of the Table in section 1 of Schedule 6 to the Capital Rules is subject to a floor of 10%; and(b) item 4 in the Table in section 1 of Schedule 6 to the Capital Rules (forward asset purchases) does not include a put option contract written by the institution.(L.N. 169 of 2023) Subdivision 3 Non-CCR Exposure (Banking Book or Trading Book) 66. Application of Subdivision 3 This Subdivision applies to a non-CCR exposure, arising from an item in a book of an authorized institution, irrespective of whether the item is in its banking book or trading book. 67. Assets underlying SFTs (1) This rule applies to the valuation of a non-CCR exposure arising from the assets underlying a specified SFT.(2) For a specified SFT, an authorized institution must—(a) treat the assets sold or lent, or the assets provided as collateral, under the specified SFT as an on-balance sheet exposure of the institution as if the institution had never entered into the specified SFT; and (L.N. 152 of 2025)(b) value the exposure in accordance with the applicable provision in Division 5.(L.N. 169 of 2023) 67A. Outstanding transaction in securities, foreign exchange or commodities (1) If any transaction in securities, foreign exchange or commodities (other than a repo-style transaction) that is entered into by an authorized institution on a delivery-versus-payment basis is outstanding on or after the 5th business day after the settlement date of that transaction, the institution must recognize an exposure to the counterparty to the transaction at the positive current exposure incurred by the institution under the transaction.(2) If any transaction in securities, foreign exchange or commodities (other than a repo-style transaction) that is entered into by an authorized institution on a basis other than a delivery-versus-payment basis is outstanding after the settlement date of that transaction, the institution must recognize an exposure to the counterparty to the transaction as the sum of—(a) the amount of payment made, or the current market value of the thing delivered, by the institution under the transaction; and(b) any positive current exposure incurred by the institution under the transaction.(L.N. 169 of 2023) 68. Option contract (1) This rule applies to the valuation of a non-CCR exposure arising from an option contract entered into by an authorized institution.(2) The exposure is valued at the gross jump-to-default risk amount in accordance with rule 71C. (L.N. 169 of 2023) 69. (Repealed L.N. 152 of 2025) 70. Covered bond (1) This rule applies to the valuation of a non-CCR exposure arising from a covered bond held by an authorized institution.(2) The exposure must be valued—(a) at the nominal value of the covered bond; or(b) if all conditions in subrule (3) are met at the inception of the covered bond and throughout its remaining maturity—at 30% of the nominal value.(3) For subrule (2)(b), the conditions are as follows—(a) the pool of the covered bond’s underlying assets (cover pool) exclusively consists of claims falling within the following description—(i) a claim on, or guaranteed by, a sovereign, a public sector entity or a multilateral development bank;(ii) a claim that, if it had been incurred by the institution, would constitute a regulatory real estate exposure that would fall within section 65B of the Capital Rules, where— (A) the exposure would qualify for a risk-weight of 35% or lower under that section; and (B) the exposure in aggregate has a loan-to-value ratio of 80% or lower; (L.N. 169 of 2023) (iii) a claim that, if it had been incurred by the institution, would constitute a regulatory real estate exposure that would fall within section 65C of the Capital Rules, where— (A) the exposure would qualify for a risk-weight of 100% or lower under that section; and (B) the exposure in aggregate has a loan-to-value ratio of 60% or lower; (L.N. 169 of 2023) (b) subject to paragraph (c), the ratio of the nominal value of the cover pool assigned by the issuer to cover the issuer’s obligations under the covered bonds to the outstanding amount of the nominal value of the covered bonds exceeds 110%;(c) if the ratio mentioned in paragraph (b) becomes less than 110% but not less than 100%, the shortfall is covered by—(i) assets that are of the same type as that of the underlying assets;(ii) liquid and high-quality assets (for example, cash or marketable debt securities); or(iii) derivative contracts entered into by the issuer for hedging the risks arising from the covered bonds.(4) For calculating the loan-to-value ratio for a regulatory real estate exposure mentioned in subrule (3)(a)(ii) or (iii), section 206(i) and (j) of the Capital Rules must be complied with for valuing the collateral and for monitoring and reviewing the value of the collateral, as if those provisions were applicable to the issuer of the covered bond. (L.N. 169 of 2023)(5) In this rule—covered bond (資產覆蓋債券) has the meaning given by section 2(1) of the Capital Rules, with the modification that the reference to the calculation of the risk-weighted amount for credit risk is treated as a reference to the calculation of the value of an exposure; (L.N. 169 of 2023)loan-to-value ratio (貸款與價值比率) means the amount of the exposure divided by the value of the residential or non-residential property securing the exposure; (L.N. 169 of 2023)regulatory real estate exposure (監管地產風險承擔) has the same meaning as in section 65(1) of the Capital Rules. (L.N. 169 of 2023) 71. Investment structure (1) This rule applies to the valuation of the non-CCR exposures arising from an investment structure held by an authorized institution.(2) The institution—(a) subject to paragraphs (b) and (c), must, if the current book value of the institution’s holding of interests in the investment structure is less than 0.25% of the amount of the institution’s Tier 1 capital—(i) assign the exposure arising from the investment structure as an exposure to a distinct counterparty; and(ii) value the exposure at the current book value of the institution’s holding of interests in the investment structure;(b) may choose not to apply paragraph (a) and instead apply subrule (3) or (4), as the case requires; or(c) must apply subrule (3) or (4), as the case requires, if paragraph (a) is not applicable to the institution. (L.N. 152 of 2025)(3) If the institution is able to identify some or all of the underlying assets of the investment structure, the institution must—(a) for each underlying asset identified by the institution the value of the exposure to which, valued by the method mentioned in subrule (6), equals or exceeds 0.25% of the amount of the institution’s Tier 1 capital—(i) assign an exposure to the counterparty corresponding to the underlying asset; and(ii) value the exposure by the method mentioned in subrule (6);(b) for underlying assets identified by the institution the value of the exposure to each of which, valued by the method mentioned in subrule (6), is less than 0.25% of the amount of the institution’s Tier 1 capital—(i) value the exposure to each such underlying asset by the method mentioned in subrule (6); and(ii) assign the aggregate of those values as an exposure to a distinct counterparty; and(c) for underlying assets that the institution is unable to identify—(i) assign an exposure arising from those underlying assets as an exposure to a hypothetical counterparty called the “unknown clientˮ; and(ii) value the exposure at the current book value of the institution’s holding of interests in the investment structure less—(A) the value of any exposure determined under paragraph (a); and(B) the value of any exposure determined under paragraph (b). (L.N. 152 of 2025)(4) If the institution is unable to identify any of the underlying assets of the investment structure, the institution must—(a) assign an exposure arising from the investment structure as an exposure to a hypothetical counterparty called the “unknown clientˮ; and(b) value the exposure at the current book value of the institution’s holding of interests in the investment structure. (L.N. 152 of 2025)(4A) The institution must aggregate the value of all of its exposures that have been assigned to the unknown client in accordance with subrule (3)(c)(i) or (4)(a) in respect of all investment structures held by the institution as if they were related to the same counterparty, to which rule 44(1) applies. (L.N. 152 of 2025)(5) An authorized institution must not enter into a scheme to avoid the application of subrule (3)(a), with a view to circumventing a limit prescribed under rule 44(1) or (2). (L.N. 152 of 2025) Example— Investing in several individually immaterial investment structures with identical underlying assets. (6) If, under subrule (3)(a) or (b), an exposure arising from an underlying asset (asset A) is to be valued by the method mentioned in this subrule, the exposure must be valued as follows— (L.N. 152 of 2025)(a) if the rights of all the investors in the investment structure are identical, by using Formula 4;(b) if there are differences in seniority levels among the investors in the investment structure, by multiplying the following—(i) the share of the institution’s holding of interests in the tranche, expressed as a percentage; (L.N. 152 of 2025)(ii) the lower of—(A) the nominal value of the tranche of the investment structure in which the institution holds an interest; and(B) the nominal value of each underlying asset in the portfolio of assets underlying the investment structure.(7) Formula 4 is as follows—Formula 4 E(A) = Min [(SA × NAVAI/NAVS), BV](L.N. 152 of 2025)where— E(A) = the value of the institution’s exposure to asset A underlying the investment structure; SA = the total value of the investment structure’s exposure to asset A as reported in the latest financial report of the investment structure; NAVAI = the net asset value of the share of the institution’s holding of interests in the investment structure; NAVS = the net asset value of the investment structure; and BV = the current book value of the institution’s holding of interests in the investment structure. (8) To avoid doubt, an authorized institution’s exposure to a counterparty, arising from an underlying asset of an investment structure, must be included in the institution’s non-CCR exposures to the counterparty in determining the institution’s ASC exposure to the counterparty. (L.N. 152 of 2025)(9) In this rule—tranche (份額) means a contractually established segment (relevant segment) of the credit risk associated with a pool of underlying exposures in a securitization transaction, or in a transaction of a similar structure, if—(a) a position in the relevant segment entails a risk of credit loss greater than, or less than, that of a position of the same amount in each other contractually established segment; and(b) no account is taken of any credit protection provided by third parties directly to the holders of positions in the relevant segment or in other contractually established segments. 71A. Off-balance sheet exposure—unsegregated collateral (1) This rule applies to the valuation of an off-balance sheet exposure of an authorized institution to a counterparty arising from unsegregated collateral posted by the institution to the counterparty for a transaction or contract booked in the institution’s banking book or trading book.(2) The exposure must be valued—(a) if the institution is a BSC AI—at the credit equivalent amount calculated in accordance with the relevant provisions for unsegregated collateral set out in Division 4 of Part 5 of the Capital Rules; or(b) if the institution is an IRB AI or an STC AI—at the credit equivalent amount calculated in accordance with the relevant provisions for unsegregated collateral set out in Division 4 of Part 4 of the Capital Rules. (L.N. 152 of 2025)(L.N. 169 of 2023) Subdivision 3A Non-CCR Exposure (Trading Book): Authorized Institution that Uses STM Approach or IMA for Market Risk (Subdivision 3A added L.N. 169 of 2023) 71B. Application of Subdivision 3A This Subdivision applies to a non-CCR exposure arising from an item in the trading book (relevant exposure) of an authorized institution that uses the STM approach, IMA, or a combination of the STM approach and IMA, to calculate its regulatory capital for market risk, unless Subdivision 3 contains a provision that specifically provides for the valuation of the exposure. 71C. Gross jump-to-default risk amount (1) Subject to the modifications set out in subrule (2), an authorized institution must calculate the gross jump-to-default risk amount in respect of a relevant exposure of the institution to a counterparty in accordance with section 281U of the Capital Rules as if the institution were calculating the SA-DRC (non-securitization) under the STM approach.(2) The modifications referred to in subrule (1) are—(a) a loss given default of 100% must be assigned to the relevant exposure; and(b) any adjustment in relation to the maturity of an exposure under section 281U of the Capital Rules does not apply.(3) In this rule—relevant exposure (有關風險承擔)—see rule 71B;SA-DRC (non-securitization) (SA-DRC(非證券化)) has the meaning given by section 281 of the Capital Rules. Subdivision 4 Non-CCR Exposure (Trading Book): Authorized Institution that does not Fall within Subdivision 3A (L.N. 169 of 2023) 72. Application of Subdivision 4 This Subdivision applies to a non-CCR exposure arising from an item in the trading book of an authorized institution that does not fall within Subdivision 3A.(L.N. 169 of 2023) 73. General—current book value A non-CCR exposure, arising from an item in an authorized institution’s trading book, must be valued at the item’s current book value, unless this Subdivision or Subdivision 3 contains a provision that specifically provides for the valuation of the exposure. 74. Shares or debt securities A non-CCR exposure arising from the holding of shares or debt securities must be valued at the current market value of the shares or debt securities. 75. Futures, forward or swap contract (1) This rule applies to a non-CCR exposure arising from any of the following derivative contracts entered into by an authorized institution—(a) a futures contract;(b) a forward contract;(c) a swap contract.(2) The exposure must be valued as follows—(a) first, the contract must be decomposed into individual legs in accordance with sections 289(2)(c)(i), (ii) and (iii) and 292(1)(c), (d) and (e) of the Capital Rules, as if those provisions were applicable to the institution;(b) second—(i) subject to paragraph (c), only legs representing non-CCR exposures are to be included as an exposure; and(ii) each of those legs must be valued at the fair value of the relevant underlying asset of the contract; and(c) third, a leg representing an exposure to an underlying basket of assets or asset index under the contract (underlying basket) must be measured in accordance with rule 71 as if the underlying basket were an investment structure held by the institution with the modifications that— (L.N. 152 of 2025)(i) a reference to the current book value of the institution’s holding of interests in the investment structure is treated as the fair value of the underlying basket; and (L.N. 152 of 2025)(ii) Formula 4 is to be replaced by Formula 5.(3) Formula 5 is as follows—Formula 5 E(A) = W × FVwhere— E(A) = the value of the institution’s exposure arising from an asset (asset A) underlying the investment structure; W = the weight of asset A in the underlying basket of assets or asset index mentioned in subrule (4); and FV = the fair value of the underlying basket of assets or asset index mentioned in subrule (4). (L.N. 152 of 2025)(4) For Formula 5—(a) the weight of an asset in a basket of assets is the ratio of the fair value of that asset to the aggregate fair value of all the assets in the basket of assets; (L.N. 152 of 2025)(b) the weight of an asset in an asset index is the weight of the asset in the asset index as specified by the index provider that compiles the index; and(c) the fair value of an asset index equals to— (L.N. 152 of 2025)(i) the current index value multiplied by—(A) for a futures contract, the monetary value of 1 index point set by the futures exchange where the futures contract is traded; or(B) in any other case, the monetary value of 1 index point as agreed by the counterparties of the derivatives contract; or(ii) the fair value of the underlying basket of assets by reference to which the index is compiled. (L.N. 152 of 2025)(5) If an individual leg is an exposure treated as arising from a zero-coupon specific risk-free security, that exposure may be excluded.(5A) In subrules (2), (3) and (4)—asset index (資產指數) means an index calculated by reference to a basket of assets. (L.N. 152 of 2025)(6) In subrule (5)—specific risk-free security (無特定風險證券) has the meaning given by section 281 of the Capital Rules. 76. Credit derivative contract (1) This rule applies to a non-CCR exposure arising from a credit derivative contract entered into by an authorized institution.(2) For a credit derivative contract other than an nth-to-default credit derivative contract under which the institution is the protection seller, the institution must value an exposure to the reference entity, arising from the contract, at the amount due in the case a credit event specified in the contract occurs minus the absolute mark-to-market value of the credit derivative contract.(3) For an nth-to-default credit derivative contract under which the institution is the protection seller, the institution must—(a) value the exposure, arising from each of the basket of reference obligations, to the relevant reference entity by using Formula 6; or(b) value the exposure, arising from each of the basket of reference obligations, to the relevant reference entity in the full nominal amount of the contract.(4) Formula 6 is as follows—Formula 6 E = N × max (1/n, min(1, 1.6 – 0.2n))where— E = the value of the institution’s exposure to the relevant reference entity; N = the notional amount of the contract; and n = the number of reference obligations that need to default to trigger payment by the protection seller. 77. Other derivative contract (1) This rule applies to a non-CCR exposure arising from a derivative contract entered into by an authorized institution, unless this Division contains a provision that specifically provides for the valuation of the exposure.(2) If the exposure to the underlying obligor of a derivative contract arises from a long position under the contract, the exposure must be valued at the amount that the institution would lose if the underlying obligor were to immediately default.(3) If the exposure to the underlying obligor of a derivative contract arises from a short position under the contract, the exposure must be valued at the amount that the institution would gain if the underlying obligator were to immediately default. Division 5A Valuation of Cryptoasset-related Exposures (Division 5A added L.N. 152 of 2025) 77A. Application of Division 5A (1) This Division applies to the valuation of a CCR exposure or a non-CCR exposure of an authorized institution to a counterparty that arises from a cryptoasset, for determining the institution’s ASC exposure to the counterparty.(2) Despite the requirements relating to cryptoasset-related exposures set out in these Rules, the Monetary Authority may, by written notice given to one or more applicable authorized institutions, require an applicable authorized institution to value a cryptoasset-related exposure, or exposures belonging to a class of cryptoasset-related exposures, by a method specified in the notice, if the Monetary Authority, after taking into account the considerations set out in subrule (3), is satisfied on reasonable grounds that it is prudent to impose the requirement.(3) The considerations are—(a) the risks associated with the cryptoasset-related exposure or class of cryptoasset-related exposures;(b) any risk mitigation measures taken by the institution to manage those risks and the risks associated with those measures;(c) the financial soundness of the institution;(d) the changes in market conditions or technological innovations;(e) the stability and effective working of the financial system of Hong Kong; and(f) any other factors that the Monetary Authority considers relevant.(4) An applicable authorized institution must comply with a notice given to it under subrule (2).(5) In this rule—applicable authorized institution (適用認可機構) means an authorized institution to which the Monetary Authority has given a written notice under section 359(2) of the Capital Rules. 77B. Valuation of cryptoasset-related exposure associated with risk of counterparty default An authorized institution must, in respect of a cryptoasset-related exposure of the institution that is associated with the risk of default of a counterparty—(a) identify each specific counterparty or LC group to which the institution is exposed and in respect of which the institution is required to calculate regulatory capital for credit risk or regulatory capital for market risk under the Capital Rules; and(b) value the exposure attributed to each counterparty or LC group identified under paragraph (a) in accordance with this Division. 77C. Valuation of certain group 1 cryptoasset-related exposures in banking book (1) This rule applies to a group 1 cryptoasset-related exposure in an authorized institutionʼs banking book that falls within paragraph (a) of the definition of cryptoasset-related exposure in rule 2(1).(2) The institution must value the exposure—(a) in the case of a group 1a cryptoasset-related exposure—in accordance with Division 5, in a manner consistent with the cryptoassetʼs non-tokenised equivalent traditional asset; and(b) in the case of a group 1b cryptoasset-related exposure—(i) if the institution is a BSC AI or an STC AI—subject to the modifications set out in rule 77F, in accordance with Subdivision 2 or 3 of Division 2 of Part 12 of the Capital Rules, as the case requires, in the same manner as the institution calculates its risk-weighted amount for credit risk of the exposure under the Capital Rules but without converting the exposure amount into a risk-weighted amount; and(ii) if the institution is an IRB AI—in accordance with subparagraph (i) as if it were an STC AI. 77D. Valuation of certain group 1 cryptoasset-related exposures and group 2a cryptoasset-related exposures in trading book (1) This rule applies to a group 1 cryptoasset-related exposure or group 2a cryptoasset-related exposure in an authorized institutionʼs trading book that falls within paragraph (a) of the definition of cryptoasset-related exposure in rule 2(1).(2) The institution must value the exposure—(a) in the case of a group 1a cryptoasset-related exposure—in accordance with Division 5, in a manner consistent with the cryptoassetʼs non-tokenised equivalent traditional asset;(b) in the case of a group 1b cryptoasset-related exposure—in accordance with Division 5, in a manner consistent with the cryptoassetʼs reference asset (within the meaning of section 363 of the Capital Rules);(c) in the case of a group 2a cryptoasset-related exposure—at the gross jump-to-default risk amount calculated in accordance with rule 71C; and(d) where the institution is exposed to the risk of default of the redeemer or the risk arising when intermediaries perform the redemption function in respect of the cryptoasset—(i) if the institution is a BSC AI or an STC AI—subject to the modifications set out in rule 77F, in accordance with section 376 or 384 of the Capital Rules, as the case requires, in the same manner as the institution calculates its risk-weighted amount for credit risk of the exposure under the Capital Rules but without converting the exposure amount into a risk-weighted amount; and(ii) if the institution is an IRB AI—in accordance with subparagraph (i) as if it were an STC AI. 77E. Valuation of certain group 2b cryptoasset-related exposures (1) This rule applies to a group 2b cryptoasset-related exposure of an authorized institution that falls within paragraph (a) of the definition of cryptoasset-related exposure in rule 2(1).(2) The institution must value the exposure—(a) at the gross jump-to-default risk amount calculated in accordance with rule 71C; and(b) where the institution is exposed to the risk of default of the redeemer or the risk arising when intermediaries perform the redemption function in respect of the cryptoasset—(i) if the institution is a BSC AI or an STC AI—subject to the modifications set out in rule 77F, in accordance with section 376 of the Capital Rules, in the same manner as if the institution were to calculate its risk-weighted amount for credit risk of the exposure under the Capital Rules but without converting the exposure amount into a risk-weighted amount; and(ii) if the institution is an IRB AI—in accordance with subparagraph (i) as if it were an STC AI. 77F. Modifications for rules 77C, 77D and 77E For rules 77C(2)(b)(i), 77D(2)(d)(i) and 77E(2)(b)(i), the modifications are—(a) if the exposure amount of a cryptoasset-related exposure is calculated under section 71(1) or 118(1) of the Capital Rules—application of the section is subject to rule 65(2);(b) in the case of an option contract on cryptoassets entered into by the institution and booked in its banking book—rule 68 applies; and(c) if the institution is required to calculate an add-on under section 380 of the Capital Rules—the institution may disregard the add-on calculated under that section. 77G. Valuation of default risk exposures in respect of derivative contracts or SFTs on cryptoassets (1) This rule applies to an exposure of an authorized institution that falls within paragraph (b) of the definition of cryptoasset-related exposure in rule 2(1).(2) The institution must value the exposure at the amount of the default risk exposure determined as follows—(a) subject to paragraph (b)—in accordance with sections 10A and 10AB, and Parts 6A and 12 of the Capital Rules;(b) if the institution uses any internal model based approach to calculate the amount of the default risk exposure in respect of its derivative contracts on a group 1a cryptoasset or group 1b cryptoasset for calculating its capital adequacy ratio under the Capital Rules—by using the SA-CCR approach. 77H. Valuation of exposures in respect of cryptoasset that references securitization transaction or CIS (1) This rule applies to an exposure of an authorized institution that falls within paragraph (c) of the definition of cryptoasset-related exposure in rule 2(1).(2) The institution must value the exposure—(a) for the risk of default of the securitization transaction or CIS referenced by the cryptoasset—in accordance with rule 71; and(b) if applicable, for any other risk of default identified by the institution—in accordance with rule 77C(2)(b), 77D(2)(d) or 77E(2)(b), as the case requires. 77I. Application of rules 67 and 67A to cryptoasset-related exposures (1) Rule 67 applies to a non-CCR exposure arising from a cryptoasset underlying a specified SFT as if the reference to Division 5 in rule 67(2)(b) were a reference to Division 5A.(2) Rule 67A applies to a transaction in a cryptoasset entered into by an authorized institution as if a reference to securities in that rule were a reference to cryptoassets. Division 6 Valuation of CRM Uncovered Portion of Exposure 78. Application of Division 6 This Division applies to the valuation of the CRM uncovered portion of a CRM covered exposure, for an adjustment under Subdivision 2 of Division 3. 79. On-balance sheet netting (1) This rule applies to an exposure (other than a group 1 cryptoasset-related exposure) of an authorized institution that is covered by a recognized netting done under a valid bilateral netting agreement. (L.N. 152 of 2025)(2) The CRM uncovered portion of the exposure is valued at its net credit exposure calculated by using Formula 7 under section 94 of the Capital Rules, subject to the maturity mismatches provisions under section 103(1) and (3) of the Capital Rules, as if that Formula and those provisions were applicable to the institution. 80. Recognized collateral (1) This rule applies to an exposure of an authorized institution that is covered by a recognized collateral.(2) If the institution is a BSC AI, the CRM uncovered portion of the exposure is valued as follows— (L.N. 152 of 2025)(a) for an exposure that is not an off-balance sheet exposure to which rule 65 applies—by using Formula 7;(b) for an exposure that is an off-balance sheet exposure to which rule 65 applies—by using Formula 7, with the modification that “current market value of recognized collateral” in that Formula is multiplied by the CCF applicable to that off-balance sheet exposure as determined under rule 65. (L.N. 169 of 2023)(3) Formula 7 is as follows—Formula 7 Value of CRM uncovered portion = max [0, (original exposure – current market value of recognized collateral)] where— original exposure = the value of the exposure as calculated according to this Part, but for this Division. (4) If the institution is an IRB AI or an STC AI, the CRM uncovered portion of the exposure is valued as follows— (L.N. 169 of 2023; L.N. 152 of 2025)(a) subject to rule 48B(3), for an exposure with respect to which the simple approach is used to account for the credit risk mitigation effect of the recognized collateral—by using the same method under subrule (2)(a) or (b); (L.N. 169 of 2023)(b) for an exposure with respect to which the comprehensive approach is used to account for the credit risk mitigation effect of the recognized collateral—at the following value— (L.N. 169 of 2023)(i) for an exposure that does not fall within subparagraph (ii)—the net credit exposure in Formula 2 under section 87 of, or Formula 4 under section 89 of, the Capital Rules (as the case requires, depending on the nature of the exposure), subject to— (L.N. 169 of 2023)(A) any applicable haircuts determined in accordance with sections 90, 91 and 92 of the Capital Rules; and (L.N. 152 of 2025)(B) the maturity mismatches provisions under—(I) section 103(1), (3) and (4) of the Capital Rules; and(II) section 103(2) of the Capital Rules, with the modification that the reference to calculating a risk-weighted amount is treated as a reference to calculating the value of an exposure,as if that Formula and those provisions of the Capital Rules were applicable to the institution;(ii) for an off-balance sheet exposure (other than a default risk exposure in respect of derivative contracts)—the net credit exposure in Formula 3 under section 88(1) of the Capital Rules as adjusted (where applicable) under section 88(2) of the Capital Rules, subject to— (L.N. 169 of 2023)(A) the modification that the CCF as determined under that Formula is subject to a floor of 10%; (L.N. 169 of 2023)(B) any applicable haircuts determined in accordance with sections 90, 91 and 92 of the Capital Rules; and (L.N. 152 of 2025)(C) the maturity mismatches provisions under—(I) section 103(1), (3) and (4) of the Capital Rules; and(II) section 103(2) of the Capital Rules, with the modification that the reference to calculating a risk-weighted amount is treated as a reference to calculating the value of an exposure,as if that Formula and those provisions of the Capital Rules were applicable to the institution.(5) (Repealed L.N. 169 of 2023) 81. Recognized guarantee or recognized credit derivative contract (1) This rule applies to an exposure of an authorized institution that is covered by a recognized guarantee or recognized credit derivative contract.(2) The CRM uncovered portion of the exposure is valued by using Formula 8.(3) Formula 8 is as follows—Formula 8 Value of CRM uncovered portion = max {0, (original exposure – G × (1 – Hfx))} where— original exposure = the value of the exposure as calculated according to this Part, but for this Division; G = the maximum liability of the credit protection provider to the institution under the credit protection (subject to the maturity mismatch provisions specified in subrule (4)); and Hfx = the haircut applicable in consequence of a currency mismatch, if any, under the standard supervisory haircut specified in Schedule 7 of the Capital Rules, subject to adjustment as set out in section 92 of the Capital Rules. (4) The following maturity mismatch provisions are specified for determining the value of G in Formula 8, as if the provisions were applicable to the institution—(a) section 103(1), (3) and (4) of the Capital Rules;(b) section 103(2) of the Capital Rules, with the modification that the reference to calculating a risk-weighted amount is treated as a reference to calculating the value of an exposure.(5) To avoid doubt, for a recognized credit derivative contract to which any of the following sections of the Capital Rules is applicable, the value of G in Formula 8 is capped at the maximum amount of the contract that may be recognized under that section—(a) section 99(3);(b) section 99(4);(c) section 99B(3)(a);(d) section 99B(3)(b). (L.N. 169 of 2023) 82. Credit-linked note (1) This rule applies to an exposure that is covered by a credit-linked note.(2) The CRM uncovered portion of the exposure is valued by the method set out in rule 80 as if the exposure were—(a) covered by a recognized collateral; and(b) secured by the amount of sales proceeds of the note as cash deposits. 83. (Repealed L.N. 169 of 2023) Part 8 Connected Party Division 1 General 84. Interpretation of Part 8 (1) In this Part—ACNP exposure (ACNP風險承擔) means an aggregate connected natural persons exposure;ACNPE ratio (ACNPE比率) means an aggregate connected natural persons exposure ratio;ACP exposure (ACP風險承擔) means an aggregate connected parties exposure;ACPE ratio (ACPE比率) means an aggregate connected parties exposure ratio;aggregate connected natural persons exposure (所有關連自然人總風險承擔)—see rule 91;aggregate connected natural persons exposure ratio (所有關連自然人總風險承擔比率), in relation to an authorized institution, means the ratio, expressed as a percentage, of the institution’s ACNP exposure, to the amount of the institution’s Tier 1 capital;aggregate connected parties exposure (關連各方總風險承擔)—see rule 90;aggregate connected parties exposure ratio (關連各方總風險承擔比率), in relation to an authorized institution, means the ratio, expressed as a percentage, of the institution’s ACP exposure, to the amount of the institution’s Tier 1 capital;aggregate single connected party exposure (單一關連一方總風險承擔)—see rule 89;ASCP exposure (ASCP風險承擔) means an aggregate single connected party exposure;connected natural person (關連自然人), in relation to an authorized institution, means a natural person who is a connected party of the institution within the meaning of rule 85(1)(a), (b), (c), (d), (e) or (f);connected party (關連一方)—see rule 85;non-listed company (非上市公司) means a company not listed on a recognized stock market, but does not include a statutory corporation that is specified in Schedule 3;recognized stock market (認可證券市場) means a stock market as defined by section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571).(2) In this Part, an expression specified below has the meaning given by rule 39(1)—ASC exposure (ASC風險承擔);Category A institution (A類機構);Category B institution (B類機構);CRM covered exposure (CRM涵蓋風險承擔);entity (實體);exposure (風險承擔);recognized collateral (認可抵押品);recognized CRM (認可CRM). 85. Meaning of connected party (1) For this Part, in relation to an authorized institution, each of the following entities is a connected party of the institution—(a) a director of the institution;(b) a relative of a natural person who is a director of the institution;(c) an employee of the institution who is responsible (either individually or as a member of a committee) for approving applications for financial facilities;(d) a relative of an employee described in paragraph (c);(e) subject to subrule (2), a controller or minority shareholder controller of the institution;(f) a relative of a natural person who is a controller or minority shareholder controller of the institution;(g) subject to subrule (2), a firm, partnership or non-listed company in which the institution or any of the following entities is interested as a director, partner, manager or agent—(i) a controller, minority shareholder controller or director of the institution;(ii) a relative of a natural person who is a controller, minority shareholder controller or director of the institution;(h) a natural person, firm, partnership or non-listed company to whom the institution has provided a financial facility, if any of the following entities is a guarantor of the facility—(i) a controller, minority shareholder controller or director of the institution;(ii) a relative of a natural person who is a controller, minority shareholder controller or director of the institution.(2) However, the following entity is not a connected party of an authorized institution even if it falls within the description of subrule (1)(e) or (g)—(a) another authorized institution;(b) an entity approved under subrule (3). (L.N. 169 of 2023)(3) The Monetary Authority may, in relation to an authorized institution, approve an entity for subrule (2)(b) if the Monetary Authority considers that—(a) the entity falls within paragraph (b) of the definition of bank in section 2(1) of the Capital Rules; and(b) it is reasonable to do so, having regard to any other factors that the Monetary Authority considers relevant. (L.N. 169 of 2023)(4) In this rule—adopted (領養) means adopted in a manner recognized by the laws of Hong Kong;cohabitation relationship (同居關係) means a relationship between 2 natural persons (whether of the same sex or of the opposite sex) who live together as a couple in an intimate relationship;cohabitee (同居伴侶), in relation to a natural person who is in a cohabitation relationship with another natural person, means the other natural person;party to a union of concubinage (夫妾關係的一方), in relation to a union of concubinage, means the male partner or the female partner of the union;relative (親屬), in relation to a natural person, means the following—(a) a parent; (L.N. 152 of 2025)(b) a step-parent or adoptive parent;(c) (Repealed L.N. 152 of 2025)(d) the spouse;(e) if the person is a party to a union of concubinage—the other party of the union;(f) a cohabitee;(g) a parent, step-parent or adoptive parent of a spouse;(h) (Repealed L.N. 152 of 2025)(i) a son, step-son, adopted son, daughter, step-daughter or adopted daughter;(j) (Repealed L.N. 152 of 2025)union of concubinage (夫妾關係) means a union of concubinage entered into by a male partner and a female partner before 7 October 1971, under which union the female partner has, during the lifetime of the male partner, been accepted by his wife as his concubine and recognized as such by his family generally.(L.N. 169 of 2023) 86. Application of Part 8 This Part applies to an authorized institution incorporated in Hong Kong. Division 2 Limit on Exposure to Connected Party 87. Limit on exposure to connected party Subject to (if applicable) any variation under rule 88(1), an authorized institution must at all times maintain—(a) an ACPE ratio not exceeding 15%;(b) an ACNPE ratio not exceeding 5%; and(c) in relation to each connected natural person of the institution, an ASCP exposure not exceeding the lower of—(i) $20,000,000; and(ii) 5% of the amount of the institution’s Tier 1 capital. (L.N. 152 of 2025) 88. Monetary Authority may vary limit on exposure to connected party (1) Subject to subrules (3), (4), (5) and (6), the Monetary Authority may, by written notice served on an authorized institution, vary any or all of the limits prescribed under rule 87(a), (b) and (c) for the institution if the Monetary Authority, after taking into account the considerations set out in subrule (2), is satisfied on reasonable grounds that it is prudent to make the variation.(2) The considerations are—(a) the risks associated with the level or concentration of the institution’s exposures to its connected parties;(b) any risk mitigation measures taken by the institution to manage those risks;(c) the risks associated with those measures; and(d) any other factors that the Monetary Authority considers relevant.(3) If the Monetary Authority proposes to serve a notice (proposed notice) under subrule (1) on an authorized institution, the Monetary Authority must serve a draft of the notice (draft notice) on the institution.(4) A draft notice must—(a) specify—(i) the proposed variation of the limit concerned; and(ii) the circumstances pertaining to, and the grounds for, the proposed variation; and(b) contain a statement that the institution may, within 14 days (or a longer period approved by the Monetary Authority in writing in any particular case) from the date of service of the draft notice, make written representation to the Monetary Authority on any or all of the matters specified in the draft notice.(5) If an authorized institution makes any written representation in relation to a draft notice served on it, the Monetary Authority may, after considering the representation—(a) serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice;(b) serve a notice on the institution under subrule (1) in terms modified to take account of the representation on being satisfied that the modification should be made; or(c) elect not to serve a notice on the institution under subrule (1) if satisfied by the representation that the proposed notice should not be served on the institution.(6) If no representation is made by an authorized institution in relation to a draft notice served on it, the Monetary Authority may serve a notice on the institution under subrule (1) in substantially the same terms as the draft notice.(7) A decision of the Monetary Authority under subrule (1) is a decision to which section 101B(1) of the Ordinance applies.(8) To avoid doubt—(a) the Monetary Authority may serve a draft notice on an authorized institution to supersede an earlier draft notice served on the institution; and(b) the reference to same terms in subrule (5)(a) or (6) does not include the statement mentioned in subrule (4)(b). Division 3 Determination of Exposure to Connected Parties 89. Aggregate single connected party exposure (ASCP exposure) An authorized institution’s ASCP exposure to a connected party of the institution is the same as the institution’s ASC exposure to the party, determined in accordance with rule 46, subject to any modification under Division 4. 90. Aggregate connected parties exposure (ACP exposure) For calculating an authorized institution’s ACPE ratio under this Part, the ACP exposure of the institution is the sum of the institution’s ASCP exposure to all of its connected parties. 91. Aggregate connected natural persons exposure (ACNP exposure) For calculating an authorized institution’s ACNPE ratio under this Part, the ACNP exposure of the institution is the sum of the institution’s ASCP exposure to all of its connected natural persons. 92. Exposure disregarded (1) The Monetary Authority may give a written consent to allow an exposure or a class of exposures not to be taken into account for determining an authorized institution’s ASCP exposure to a connected party, if the Monetary Authority considers that it is reasonable to do so, having regard to—(a) the nature of, and the risks associated with, the exposure or class of exposures;(b) any risk mitigation measures taken by the institution to manage those risks;(c) the risks associated with those measures; and(d) any other factors that the Monetary Authority considers relevant.(2) The Monetary Authority may—(a) give a written consent under subrule (1) to an authorized institution or a class of authorized institutions; and(b) attach conditions to the consent. Division 4 Modification 93.

CRM covered exposure (1) For determining an ASCP exposure to a connected party in accordance with rule 46, by virtue of rule 89, subrules (2) and (3) modify the provisions in Part 7 for the valuation of a CRM covered exposure.(2) If an exposure of a Category B institution to a connected party is covered by a recognized CRM— (L.N. 169 of 2023)(a) rule 50 applies; and(b) rule 51 does not apply,as if the institution were a Category A institution, even if it is a Category B institution.(3) Without limiting any provision in Part 7, if—(a) any interest in land—(i) is pledged to the institution as a collateral (or otherwise provided as security) to cover an exposure to a connected party arising from an item in an authorized institution’s banking book;(ii) is so pledged or provided for a period not shorter than the life of the item; and(iii) is revalued by the institution at least once every 6 months during the life of the item; and(b) the criteria specified in section 77(2) of the Capital Rules are met, (L.N. 169 of 2023)the interest in land is treated as if it were a recognized collateral for valuing the exposure in this Part, the value of which is determined in accordance with subrule (4). (L.N. 169 of 2023)(4) If the recognized collateral of a CRM covered exposure of an authorized institution is in the form of an interest in land that meets all the requirements of subrule (3), the CRM uncovered portion of the exposure is valued by using Formula 9. (L.N. 169 of 2023)(5) Formula 9 is as follows—Formula 9 Value of CRM uncovered portion = max [0, (original exposure – current market value of interest in land)] where— original exposure = subject to rule 93A, the value of the exposure as calculated according to Part 7. (L.N. 169 of 2023)(6) In this rule—CRM uncovered portion (CRM不涵蓋部分) has the meaning given by rule 39(1). (L.N. 169 of 2023) 93A. Calculation of ASCP exposure of connected party For determining an ASCP exposure of an authorized institution to a connected party in accordance with rule 46, the institution must disregard rule 48(1)(a).(L.N. 169 of 2023) 94. Exposure to 2 or more entities etc. (1) If an exposure of an authorized institution is to 2 or more entities jointly, rule 87(c) applies as if the exposure were to each of those entities severally.(2) For rule 87(b) and (c), if a natural person—(a) controls a firm, partnership or non-listed company; and(b) is a connected natural person of an authorized institution,an exposure of the institution to the firm, partnership or non-listed company is treated as an exposure to the person.(3) For subrule (2)(a), a firm, partnership or non-listed company (controlled entity) is treated as being controlled by a natural person if—(a) the person owns more than 50% of the voting rights in the controlled entity;(b) the person has control of a majority of the voting rights in the controlled entity under an agreement with other shareholders (or similar holders of voting rights);(c) the person has the right to appoint or remove a majority of the members of the controlled entity’s board of directors (or a similar governing body);(d) a majority of the members of the controlled entity’s board of directors (or a similar governing body) have been appointed solely as a result of the person exercising his or her voting rights; or(e) the person has the power, under a contract or otherwise, to exercise a controlling influence over the management or policies of the controlled entity. Part 9 Repeal and Transitional and Savings Provisions Division 1 Repeal 95. Banking (Exposure Limits) Rules repealed The Banking (Exposure Limits) Rules (Cap. 155 sub. leg. R) are repealed. Division 2 Transitional and Savings Provisions (Equity) 96. Interpretation of Division 2 In this Division—repealed Rules (《已廢除規則》) means the Banking (Exposure Limits) Rules (Cap. 155 sub. leg. R). 97. Application of rule 11 on unconsolidated basis or consolidated basis—deemed rule 6(1) notice (1) A former rule 5(1) notice given to an authorized institution is deemed, if it was in effect immediately before 1 July 2019, to be a notice given to the institution under rule 6(1) on that date requiring it to apply rule 11 on the basis specified in the former rule 5(1) notice.(2) In this rule—former rule 5(1) notice (前第5(1)條通知) means—(a) a notice given under rule 5(1) of the repealed Rules requiring an authorized institution to apply rule 10 of the repealed Rules on the basis specified in the notice; or(b) a notice deemed to be given under rule 5(1) of the repealed Rules, by virtue of rule 21(2) of the repealed Rules, requiring an authorized institution to calculate its aggregate equity exposures of the repealed Rules on the basis specified in the notice. 98. Variation of equity exposure limit—deemed rule 12(1) notice (1) A former variation notice served on an authorized institution is deemed, if it was in effect immediately before 1 July 2019, to be a notice served on the institution under rule 12(1) on that date.(2) Subject to subrule (3)—(a) a former draft notice served on an authorized institution before 1 July 2019 is deemed to be a draft notice served on the institution under rule 12(3) on that date; and(b) a written representation made by the institution in relation to the former draft notice is deemed to be a written representation made by the institution in relation to the deemed draft notice.(3) In relation to a draft notice deemed to be served on an authorized institution under rule 12(3) by virtue of subrule (2)(a)—(a) rule 12(4)(b) does not apply; and(b) in making a decision under rule 12(5), the Monetary Authority—(i) must consider representation made by the institution within the original representation period; and(ii) may, but is not obliged, consider any representation made by the institution after the expiry of the original representation period.(4) In this rule—former draft notice (前通知草擬本) means a draft notice—(a) served under rule 11(3) of the repealed Rules; and(b) in relation to which the Monetary Authority had not made a decision under rule 11(5) or (6) of the repealed Rules before 1 July 2019;former variation notice (前更改通知) means a notice served under rule 11(1) of the repealed Rules;original representation period (原申述期間), in relation to a former draft notice, means the following period, whichever is the longer—(a) the 14-day period mentioned in rule 11(4)(b) of the repealed Rules;(b) where a longer period was allowed under rule 11(4)(b) of the repealed Rules—the longer period. 99. Longer period—deemed rule 14(1)(b)(i)(B) or (c)(i)(B) approval (1) Subrule (2) applies if—(a) a longer period was—(i) approved; or(ii) deemed to be approved, by virtue of rule 22(1) of the repealed Rules,under rule 13(1)(b)(ii) of the repealed Rules in relation to any share capital; and(b) the period had, immediately before 1 July 2019, yet to expire.(2) In relation to the share capital mentioned in subrule (1)(a), the portion of the period beginning on 1 July 2019 is deemed to be a longer period approved under rule 14(1)(b)(i)(B) on that date.(3) Subrule (4) applies if—(a) a longer period was—(i) approved; or(ii) deemed to be approved, by virtue of rule 22(2) of the repealed Rules,under rule 13(1)(c)(i)(B) of the repealed Rules in relation to any share capital; and(b) the period had, immediately before 1 July 2019, yet to expire.(4) In relation to the share capital mentioned in subrule (3)(a)—(a) the portion of the period beginning on 1 July 2019 is deemed to be a longer period approved under rule 14(1)(c)(i)(B) on that date; and(b) a condition attached to the earlier approval is deemed, if it was in effect immediately before 1 July 2019, to be a condition attached to the deemed approval on that date. 100. Share capital disregarded—deemed rule 14(1)(e) approval (L.N. 169 of 2023)(1) If—(a) an approval was given, or deemed to be given by virtue of rule 22(3) of the repealed Rules, under rule 13(1)(e) of the repealed Rules; and(b) the approval was in effect immediately before 1 July 2019,the approval is deemed to be an approval given under rule 14(1)(e) on 1 July 2019.(2) (Repealed L.N. 169 of 2023) 101. Equity exposure disregarded—deemed rule 14(2) consent (1) If a former rule 13(2) consent given to an authorized institution was in effect immediately before 1 July 2019—(a) the former rule 13(2) consent is deemed to be a consent given to the institution under rule 14(2) on 1 July 2019; and(b) a condition imposed on the former rule 13(2) consent is deemed, if it was in effect immediately before 1 July 2019, to be a condition attached to the deemed consent on that date.(2) In this rule—former rule 13(2) consent (前第13(2)條同意) means a consent given under rule 13(2) of the repealed Rules. Division 3 Transitional and Savings Provisions (Acquisition of Share Capital of Company) 102. Application of rule 23 on unconsolidated basis or consolidated basis—deemed rule 6(1) notice (1) A former section 79A notice given to an authorized institution is deemed, if it was in effect immediately before 1 July 2019, to be a notice given under rule 6(1) to the institution on that date requiring it to apply rule 23 on the basis specified in the former section 79A notice.(2) In this rule—former section 79A notice (前第79A條通知) means a notice given under section 79A of the Ordinance requiring an authorized institution to apply section 87A of the Ordinance on a certain basis. 103. Acquiring share capital—deemed rule 24(1) consent (1) If a former section 87A(2)(a) approval given to an authorized institution was in effect immediately before 1 July 2019—(a) the approval is deemed to be a consent given to the institution under rule 24(1) on 1 July 2019;(b) a condition attached to the approval is deemed, if it was in effect immediately before 1 July 2019, to be a condition attached to the deemed consent on that date; and(c) a condition is deemed to be attached to the deemed consent on 1 July 2019 requiring the institution to come to hold the share capital, that is the subject matter of approval, no later than 30 September 2019.(2) To avoid doubt, if the institution had already come to hold the share capital, that is the subject matter of the former section 87A(2)(a) approval, before 1 July 2019, the institution may not acquire further share capital under the consent deemed to be given under rule 24(1), but is still subject to the condition (if any) mentioned in subrule (1)(b).(3) In this rule—former section 87A(2)(a) approval (前第87A(2)(a)條批准) means—(a) an approval given under section 87A(2)(a) of the Ordinance; or(b) an approval deemed to be granted under section 87A(2)(a) of the Ordinance, by virtue of section 87A(3) of the Ordinance. 104. Longer period—deemed rule 23(3)(a)(ii) approval (1) Subrule (2) applies if—(a) a further period was approved under section 87A(8) of the Ordinance in relation to any share capital; and(b) the period had, immediately before 1 July 2019, yet to expire.(2) In relation to the share capital mentioned in subrule (1)(a)—(a) the portion of the period beginning on 1 July 2019 is deemed to be a longer period approved under rule 23(3)(a)(ii) on that date; and(b) a condition attached to the earlier approval is deemed, if it was in effect immediately before 1 July 2019, to be a condition attached to the deemed approval on that date. Division 4 Transitional and Savings Provisions (Financial Facility against Security of Own Shares etc.) 105. Financial facility against security of authorized institution’s capital-in-nature instrument etc.—application of rule 27(1) and (2) (1) If, before 1 July 2019—(a) an authorized institution provided a financial facility against the security of a capital-in-nature instrument, or non-capital LAC debt instrument, issued by—(i) the institution;(ii) a holding company of the institution;(iii) a subsidiary of the institution; or(iv) a subsidiary of a holding company of the institution; and(b) the financial facility is still in effect at the beginning of 1 July 2019,rule 27(1) and (2) does not apply in relation to the financial facility.(2) In this rule—capital-in-nature instrument (資本類票據) has the meaning given by rule 25(1);non-capital LAC debt instrument (非資本LAC債務票據) has the meaning given by rule 25(1). 106. Financial facility against security of own shares etc. issued by associated company—deemed rule 28(1) consent (1) If an approval under section 80(2) of the Ordinance given to an authorized institution was in effect immediately before 1 July 2019—(a) the approval is deemed to be a consent given to the institution under rule 28(1) on 1 July 2019; and(b) a condition attached to the approval is deemed, if it was in effect immediately before 1 July 2019, to be a condition attached to the deemed consent on that date.(2) The deemed consent ceases to have effect at the end of 30 September 2019. Division 5 (Repealed L.N. 152 of 2025) 107. (Repealed L.N. 152 of 2025) Division 6 Transitional and Savings Provisions (Interest in Land) Subdivision 1 Grace Period for Compliance 108. Grace period for complying with rule 35(a) (1) This rule applies to an authorized institution if, immediately before 1 July 2019, its land exposure ratio, calculated as if these Rules had come into operation at that time, exceeded 50%.(2) If, within the grace period, the institution—(a) does not contravene section 88 of the Ordinance as in force immediately before 1 July 2019; and(b) does not acquire any interest in land (except as described in rule 38(a) or (b)),the institution is treated as being compliant with rule 35(a) until the grace period expires.(3) In this rule—grace period (寬限期) means the period beginning on 1 July 2019 and expiring at the end of the earlier of the following dates—(a) 30 September 2019;(b) the date on which the institution becomes compliant with rule 35(a) or (if applicable) that rule as varied under rule 36(1);land exposure ratio (土地風險承擔比率) has the meaning given by rule 33. Subdivision 2 Deeming Provisions 109. Application of rule 35 on unconsolidated basis or consolidated basis—deemed rule 6(1) notice (1) A former section 79A notice given to an authorized institution is deemed, if it was in effect immediately before 1 July 2019, to be a notice given under rule 6(1) to the institution on that date requiring it to apply rule 35 on the basis specified in the former section 79A notice.(2) In this rule—former section 79A notice (前第79A條通知) means a notice given under section 79A of the Ordinance requiring an authorized institution to apply section 88 of the Ordinance on a certain basis. 110. Premises for conducting authorized institution’s business—deemed rule 37(3) consent If, immediately before 1 July 2019, the Monetary Authority regarded under section 88(3) of the Ordinance the whole of any premises in which an office of an authorized institution is situated as necessary for conducting the business of the institution, a consent is deemed to be given under rule 37(3) on 1 July 2019 to allow the institution to treat the whole of the premises as being used for conducting the institution’s business. 111. Longer period—deemed rule 38(b)(i)(B) approval If—(a) a further period was allowed under section 88(5) of the Ordinance in relation to an interest in land; and(b) the period had, immediately before 1 July 2019, yet to expire,the portion of the period beginning on 1 July 2019 is deemed to be a longer period approved under rule 38(b)(i)(B) on that date. Division 7 Transitional and Savings Provisions (Single Counterparty and Group of Linked Counterparties) Subdivision 1 Grace Period for Compliance 112. Grace period for complying with rule 44(1)(a) (1) If, at a particular time during the grace period—(a) an authorized institution’s ASCE ratio, in relation to a counterparty of it, exceeds the limit prescribed under rule 44(1)(a) or (if applicable) that rule as varied under rule 45(1); but(b) the institution does not, in relation to the counterparty, contravene section 81(1)(a) of the Ordinance as in force immediately before 1 July 2019,the institution is treated as being compliant, at that time, with rule 44(1)(a) or (if applicable) that rule as varied under rule 45(1), in relation to the counterparty.(2) In this rule—ASCE ratio (ASCE比率) has the meaning given by rule 39(1);grace period (寬限期) means the period beginning on 1 July 2019 and expiring at the end of 31 December 2019. 113. Grace period for complying with rule 44(1)(b) (1) If, at a particular time during the grace period—(a) an authorized institution’s ALCGE ratio, in relation to an LC group of it, exceeds the limit prescribed under rule 44(1)(b) or (if applicable) that rule as varied under rule 45(1); but(b) the institution does not, in relation to the entities in the group, contravene section 81(1)(a), (b), (c) or (d) of the Ordinance as in force immediately before 1 July 2019,the institution is treated as being compliant, at that time, with rule 44(1)(b) or (if applicable) that rule as varied under rule 45(1), in relation to the group.(2) In this rule—ALCGE ratio (ALCGE比率) has the meaning given by rule 39(1);grace period (寬限期) means the period beginning on 1 July 2019 and expiring at the end of 31 December 2019;LC group (LC集團) has the meaning given by rule 39(1). Subdivision 2 Deeming Provisions 114. Application of rule 44 on unconsolidated basis or consolidated basis—deemed rule 6(1) notice (1) A former section 79A notice given to an authorized institution is deemed, if it was in effect immediately before 1 July 2019, to be a notice given under rule 6(1) to the institution on that date requiring it to apply rule 44 on the basis specified in the former section 79A notice.(2) In this rule—former section 79A notice (前第79A條通知) means a notice given under section 79A of the Ordinance requiring an authorized institution to apply section 81 of the Ordinance on a certain basis. 115. (Repealed L.N. 169 of 2023) 116. Letter of comfort—deemed rule 57(1)(d)(i) approval (1) If a letter of comfort was accepted by the Monetary Authority under section 81(6)(b)(ii) of the Ordinance and the acceptance was in effect immediately before 1 July 2019—(a) the acceptance is deemed to be an approval of the letter of comfort given under rule 57(1)(d)(i) on 1 July 2019; and(b) a condition attached to the acceptance is deemed, if it was in effect immediately before 1 July 2019, to be a condition attached to the deemed rule 57(1)(d)(i) approval on that date.(2) Subject to subrule (3), a deemed rule 57(1)(d)(i) approval ceases to have effect at the end of 30 June 2020.(3) Subrule (2) does not apply to a deemed rule 57(1)(d)(i) approval of a letter of comfort that covers an exposure, arising from the 80% Loan Guarantee Product under the SME Financing Guarantee Scheme set up by The Hong Kong Mortgage Corporation Limited, to—(a) The Hong Kong Mortgage Corporation Limited; or(b) a subsidiary of The Hong Kong Mortgage Corporation Limited.(4) In this rule—deemed rule 57(1)(d)(i) approval (當作第57(1)(d)(i)條批准) means an approval deemed to be given under rule 57(1)(d)(i) by virtue of subrule (1)(a). Division 8 Transitional and Savings Provisions (Connected Party) Subdivision 1 Grace Period for Compliance 117. Grace period for complying with rule 87(a) (1) If, at a particular time during the grace period—(a) an authorized institution’s ACPE ratio exceeds the limit prescribed under rule 87(a) or (if applicable) that rule as varied under rule 88(1); but(b) the institution does not contravene section 83(1) of the Ordinance as in force immediately before 1 July 2019,the institution is treated as being compliant, at that time, with rule 87(a) or (if applicable) that rule as varied under rule 88(1).(2) In this rule—ACPE ratio (ACPE比率) has the meaning given by rule 84(1);grace period (寬限期) means the period beginning on 1 July 2019 and expiring at the end of 31 December 2019. 118. Grace period for complying with rule 87(b) (1) If, at a particular time during the grace period—(a) an authorized institution’s ACNPE ratio exceeds the limit prescribed under rule 87(b) or (if applicable) that rule as varied under rule 88(1); but(b) the institution does not contravene section 83(2)(a) of the Ordinance as in force immediately before 1 July 2019,the institution is treated as being compliant, at that time, with rule 87(b) or (if applicable) that rule as varied under rule 88(1).(2) In this rule—ACNPE ratio (ACNPE比率) has the meaning given by rule 84(1);grace period (寬限期) means the period beginning on 1 July 2019 and expiring at the end of 31 December 2019. 119. Grace period for complying with rule 87(c) (1) If, at a particular time during the grace period—(a) an authorized institution’s ASCP exposure, in relation to a connected natural person of it, exceeds the limit prescribed under rule 87(c) or (if applicable) that rule as varied under rule 88(1); but(b) the institution does not, in relation to the person, contravene section 83(2)(b) of the Ordinance as in force immediately before 1 July 2019,the institution is treated as being compliant, at that time, with rule 87(c) or (if applicable) that rule as varied under rule 88(1), in relation to the person.(2) In this rule—ASCP exposure (ASCP風險承擔) has the meaning given by rule 84(1);connected natural person (關連自然人) has the meaning given by rule 84(1);grace period (寬限期) means the period beginning on 1 July 2019 and expiring at the end of 31 December 2019. Subdivision 2 Deeming Provisions 120. Application of rule 87 on unconsolidated basis or consolidated basis—deemed rule 6(1) notice (1) A former section 79A notice given to an authorized institution is deemed, if it was in effect immediately before 1 July 2019, to be a notice given under rule 6(1) to the institution on that date requiring it to apply rule 87 on the basis specified in the former section 79A notice.(2) In this rule—former section 79A notice (前第79A條通知) means a notice given under section 79A of the Ordinance requiring an authorized institution to apply section 83 of the Ordinance on a certain basis. 121. (Repealed L.N. 169 of 2023) 121A. Non-local bank—former rule 85(3) approval (1) Subject to subrules (2) and (3), a former rule 85(3) approval is deemed to be an approval given under new rule 85(3) on the commencement date.(2) During the transitional period, if the Monetary Authority does not have sufficient available information to form a reasonable view as to whether an entity that is the subject of a former rule 85(3) approval will meet the requirements of new rule 85(3), the Monetary Authority may, by written notice given to the authorized institution to which the approval relates, require the institution to seek the Monetary Authority’s approval in respect of the entity under new rule 85(3).(3) If subrule (2) applies in respect of an entity, the deemed approval under subrule (1) is revoked on the later of—(a) if the institution seeks approval under new rule 85(3) during the transitional period, the day on which the Monetary Authority determines whether or not to give the approval; and(b) the expiry of the transitional period.(4) In this rule—amending Rules (《修訂規則》) means the Banking (Exposure Limits) (Amendment) Rules 2023 (L.N. 169 of 2023); (E.R. 1 of 2025)*commencement date (生效日期) means the date on which Part 3 of the amending Rules comes into operation;former rule 85(3) (前第85(3)條) means rule 85(3) as in force immediately before the commencement date;former rule 85(3) approval (前第85(3)條批准) means an approval under former rule 85(3) that was in effect immediately before the commencement date;new rule 85(3) (新訂第85(3)條) means rule 85(3) as amended by the amending Rules;transitional period (過渡期) means the period beginning on the commencement date and ending on the date that is 3 months after the commencement date.(L.N. 169 of 2023) Editorial Note: * Commencement date: 1 January 2025. 122. Exposure disregarded—deemed rule 92(1) consent (1) If a former section 83(4A) permit given to an authorized institution was in effect immediately before 1 July 2019—(a) the former section 83(4A) permit is deemed to be a consent given to the institution under rule 92(1) on 1 July 2019; and(b) a condition attached to the former section 83(4A) permit is deemed, if it was in effect immediately before 1 July 2019, to be a condition attached to the deemed consent on that date.(2) The deemed consent ceases to have effect at the end of 30 September 2019.(3) In this rule—former section 83(4A) permit (前第83(4A)條容許) means a permit given under section 83(4A) of the Ordinance. Schedule 1 (Repealed L.N. 152 of 2025) Schedule 2 [r. 41]Specified Sovereign-owned Entity 1. China Investment Corporation 2. Central Huijin Investment Ltd. Schedule 3 [r. 84]Statutory Corporation Excluded from Meaning of Non-listed Company