Last Friday, the Securities and Futures Commission (SFC) issued a circular to announce the launch of a key risk indicator (KRI) platform to collect and analyse KRI data from selected licensed corporations (LCs).

The platform is aimed at facilitating the SFC’s supervision of global firms which are exposed to the changing dynamics of global markets. It supplements the SFC’s existing monitoring tools and enhances the SFC’s information gathering and analytical capabilities to better identify and manage existing and emerging risks.

Who are the in-scope LCs?

Initially, 22 global financial institutions which are considered as systemically important are in-scope for the purpose of the KRI platform:

1. Bank of America Merrill Lynch 9. Goldman Sachs 17. Societe Generale
2. Bank of New York Mellon 10. HSBC 18. Standard Chartered
3. Barclays 11. JP Morgan Chase 19. State Street
4. BNP Paribas 12. Mitsubishi UFJ FG 20. Sumitomo Mitsui FG
5. Citigroup 13. Mizuho FG 21. UBS
6. Credit Agricole 14. Morgan Stanley 22. Wells Fargo
7. Credit Suisse 15. Nomura
8. Deutsche Bank 16. Royal Bank of Canada

The SFC will refine the platform from time to time and may consider including additional LCs to enhance its regulatory oversight.

What do the in-scope LCs need to do?

LCs from in-scope institutions are required to complete KRI surveys on a monthly, quarterly and yearly basis.

The monthly survey focuses on liquidity risk, whereas the quarterly and yearly surveys are significantly more detailed and cover areas such as:

  • Financial information, transfer pricing and staff information;
  • Conduct risk (for example, the number of instances of certain types of non-compliance, client complaints, internal whistleblowing incidents, internal alerts, disciplinary actions and regulatory involvement need to be disclosed);
  • Other aspects of prudential risk (in addition to liquidity risk), including credit risk, market risk and operational risk.

The surveys cover all regulated activities conducted by the LCs and their licensed representatives in Hong Kong, regardless of where the risk positions are ultimately booked.

In-scope LCs should submit their surveys electronically via the SFC’s WINGS platform, which includes a user guide as well as demonstration video. The SFC has conducted soft consultations and pilot tests of the KRI platform with all of the in-scope LCs.

The first submission of data is required by 31 January 2020 for the reporting period ending 31 December 2019.

William Hallatt
William Hallatt
Partner, Head of Financial Services Regulatory, Asia, Hong Kong
+852 2101 4036
Hannah Cassidy
Hannah Cassidy
Partner, Hong Kong
+852 2101 4133