Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 27

Authorized institution shall calculate its capital adequacy ratio on solo basis, solo-consolidated basis or consolidated basis

Division 7—Calculation of capital adequacy ratio: solo basis,
solo-consolidated basis and consolidated basis

(1) An authorized institution shall—

   (a)  calculate its capital adequacy ratio on a solo basis or, if it has the
        approval to do so under section 28(2)(a), calculate its capital 
        adequacy ratio on a solo-consolidated basis; and

   (b)  subject to section 33, calculate its capital adequacy ratio on a
        consolidated basis.

(2) Subject to section 33, the Monetary Authority may, in a section  98 (2)
requirement, require an authorized institution to calculate its
capital adequacy ratio on a consolidated basis in respect of a subsidiary of
the institution (other than a subsidiary which is an insurance firm or
securities firm) where—

   (a)  more than 50% of the total assets or total income of the subsidiary
        relate to or arise from the carrying out of one or more than one
        relevant financial activity; or

   (b)  the Monetary Authority is satisfied that, after taking into account
        the nature of the business undertaken by the subsidiary, the
        institution should calculate its capital adequacy ratio on a
        consolidated  basis in respect of that subsidiary if a relevant risk
        of the institution is to be adequately identified and assessed.

(3) In subsection (2)—

"relevant financial activity" (有關財務活動), in relation to a
subsidiary of an authorized institution, means—

   (a)  an activity which is ancillary to a principal activity of the
        institution, including—

        (i)    owning and managing the institution's property; and

        (ii)   performing information technology functions for the
               institution;

   (b)  lending, including—

        (i)    the provision of consumer or mortgage credit;

        (ii)   factoring;

        (iii)  forfaiting; and

        (iv)   the provision of guarantees and other financial commitments;

   (c)  financial leasing;

   (d)  money transmission services;

   (e)  issuing and administering a means of payment, including—

        (i)    credit cards;

        (ii)   travellers' cheques; and

        (iii)  bank drafts;

   (f)  trading for the subsidiary's own account, or for accounts of the
        subsidiary's customers, in—

        (i)    money market instruments;

        (ii)   foreign exchange;

        (iii)  financial instruments which are traded on an exchange;

        (iv)   OTC derivative transactions; or

        (v)    transferable securities;

   (g)  participating in securities issues, including the provision of
        services relating to the issues;

   (h)  the provision of—

   (i)  advice to undertakings on capital structure or industrial strategy,
        including any matter relating to capital structure or industrial
        strategy; or

        (ii)   advice and services relating to mergers and the purchase of
               undertakings;

        (i)    money broking; or

   (j)  portfolio management and the provision of advice in relation to
        portfolio management.

(4) An authorized institution which calculates its capital adequacy  ratio on
a consolidated basis shall give notice in writing to the Monetary Authority of
any of the following matters as soon as is practicable after the institution
is aware of the matter or ought to be aware of the matter—

   (a)  a member of the institution's consolidation group ceasing to be a
        subsidiary of the institution;

   (b)  a subsidiary of the institution becoming a member of its
        consolidation group;

   (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 referred to in
        paragraph (b)).

"relevant financial activity" (有關財務活動)