The Hong Kong Monetary Authority (HKMA) today announces that it has completed its annual assessment of the list of Domestic Systemically Important Authorized Institutions (D-SIBs). Based on the assessment results, the list of authorized institutions designated as D-SIBs remains unchanged compared to the list of D-SIBs published by the HKMA a year ago.

The latest list of D-SIBs includes six companies, including HSBC and Standard Chartered.

Under the D-SIB framework, each of the authorized institutions designated as a D-SIB will be required to include a Higher Loss Absorbency (HLA) requirement into the calculation of their regulatory capital buffers within a period of 12 months after the formal notification of its designation. The HLA requirement applicable to a D-SIB (expressed as a ratio of an authorized institution’s Common Equity Tier 1 capital to its risk-weighted assets as calculated under the Banking (Capital) Rules) ranges between 1% and 3.5% (depending on the assessed level of the D-SIB’s systemic importance).

Compared to the list of D-SIBs published on 24 December 2019, there is no change to the HLA requirements applied to the designated D-SIBs.

The rationale for imposing an HLA requirement on D-SIBs is to reduce any probability of them becoming non-viable. This is considered both prudent and justified given the greater impact that they could have, in the unlikely event of their failure, on the domestic financial system and the local economy more broadly.