(1) Subject to subsection (2), if a category 2 institution’s business plans, or particular circumstances, change, or are expected to change, in a manner that may be likely to cause one or more grounds specified in Part 1 of Schedule 1 to arise in relation to the institution, the institution must—
(a) as soon as is practicable notify the Monetary Authority of the matter; and
(b) provide the Monetary Authority with any particulars of the matter that the Monetary Authority requests.
(2) A category 2 institution must comply with subsection (1) irrespective of whether Part 3 of Schedule 1 may apply to it.
Part 6
Action that may be taken by Monetary Authority when notified of Certain Relevant Liquidity Event and Decisions to which Section 101B(1) of
Ordinance applies
17. Conditions that Monetary Authority may impose on category 1 institution when it gives notice under section 15(1) of relevant liquidity event that falls within paragraph (a)(ii) of definition of relevant liquidity event
(1) Where a category 1 institution notifies the Monetary Authority under section 15(1) of a relevant liquidity event that falls within paragraph (a)(ii) of the definition of relevant liquidity event in section 15(3), the Monetary Authority may, by notice in writing to the institution (subsection (1) notice), require the institution to comply with the conditions specified in the subsection (1) notice that relate to the institution’s LCR and with which the Monetary Authority is satisfied that, in the circumstances of the case, it is prudent and reasonable that the institution must comply.
(2) Where a category 1 institution is the subject of a subsection (1) notice, the Monetary Authority may, at any time, by notice in writing to the institution (subsection (2) notice) do one or more of the following as the Monetary Authority thinks proper—
(a) amend any conditions specified in the subsection (1) notice (including amending by specifying new conditions in the subsection (1) notice); or
(b) cancel any conditions specified in the subsection (1) notice (including conditions specified in the subsection (1) notice pursuant to a prior subsection (2) notice).
(3) A notice under subsection (2) must specify the date, or the occurrence of an event, from which the amendment or the cancellation takes effect.
(4) Without prejudice to the generality of subsection (1) or (2), conditions specified in a subsection (1) or (2) notice given to a category 1 institution may include any one or more of the following—
(a) a condition that the institution must at all times maintain an LCR of not less than the percentage specified in the notice (which percentage is not more than the percentage set out in section 5);
(b) a condition that the institution must submit to the Monetary Authority a plan, within such period (being a period which is reasonable in all the circumstances of the case) as specified in the notice, satisfying the Monetary Authority that, if the plan is implemented by the institution, it would maintain, within a period which is reasonable in all the circumstances of the case, an LCR not less than the level set out in section 5;
(c) a condition that the institution must implement the plan referred to in paragraph (b) with effect from the date, or the occurrence of an event, specified in the notice;
(d) a condition requiring the institution to reduce its liquidity risk exposures in such manner, or adopt such measures, as are specified in the notice which, in the opinion of the Monetary Authority, will cause the institution to maintain, within a period reasonable in all the circumstances of the case, an LCR not less than the level set out in section 5; or
(e) a condition that the institution must make such reports regarding its LCR to the Monetary Authority as are specified in the notice
(5) A category 1 institution must comply with the requirements of a notice given to it under this section.
17A. Decisions to which section 101B(1) of Ordinance applies
A decision made by the Monetary Authority under section 4(1) or (4) or 17(1) or (2)(a) is a decision to which section 101B(1) of the Ordinance applies.
Part 7
Calculation of LCR Division 1—General
18. Interpretation – Part 7
In this Part and Schedules 2 to 4—
approved RMBS ( ) means RMBS that falls within section 3(b) of Part 1 of Schedule 2;
central bank reserves ( ), in relation to a category 1 institution, means any funds placed by the institution with the Monetary Authority for the account of the Exchange Fund that are repayable on demand and any of the following funds placed by the institution with a central bank—
(a) funds required to be so placed by virtue of the central bank’s reserve requirements but only to the extent that those funds are allowed by the central bank to be drawn down by the institution in times of financial stress;
(b) funds that are repayable on demand;
(c) term funds that are explicitly and contractually repayable on notice (which expires on the first day of the LCR period) from the institution; and
(d) term funds against which the institution can borrow from the central bank a loan on a term basis, or on an overnight but automatically renewable basis, as long as the term funds concerned are still placed with the central bank but, if the amount of the loan that the institution may borrow from the central bank against the term funds concerned and the amount of the funds are different, only the lower of those 2 amounts;
covered bond ( ) means a bond, issued by a financial institution or any of its associated entities—
(a) which is subject to relevant laws or regulations that are specially designed to protect the holder of the bond; and
(b) the proceeds from the issue of which must, in conformity with those relevant laws or regulations be invested in assets which, during the whole period of the validity of the bond, are capable of covering claims attached to the bond and which, in the event of the failure of the issuer of the bond, would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest;
general wrong-way risk ( ) is to be construed in accordance with section 226E(3)(b) of the Capital Rules;
host jurisdiction ( ), in relation to a category 1 institution incorporated in Hong Kong, means a jurisdiction outside Hong Kong in which any of the institution’s overseas branches operates or any of its associated entities is incorporated;
HQLA qualifying asset ( ) means an asset referred to in section 26(a);
relevant securities financing transaction ( ) means a securities financing transaction that falls with section 35(1)(a);
retail deposit ( ) has the meaning assigned to it by section 40;
small business funding ( ) has the meaning assigned to it by section 40.