Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 28

Authorized institution may apply for approval to calculate its capital adequacy ratio on solo-consolidated basis

(1) An authorized institution may apply to the Monetary Authority for approval
to calculate its capital adequacy ratio on a solo-consolidated basis instead
of a solo basis in respect of such of its subsidiaries which are members of
its consolidation group as specified in the application.

(2) Subject to subsection (3), the Monetary Authority shall determine an
application under subsection (1) from an authorized institution by—

   (a)  granting approval to the institution to calculate its capital 
        adequacy ratio on a solo-consolidated basis instead of a solo basis in
        respect of such subsidiaries of the institution as specified in the
        approval, and giving the institution a section 98(2) requirement to
        give effect to the approval; or

   (b)  refusing to grant the approval.

(3) Without prejudice to the generality of subsection (2)(b), the Monetary
Authority shall refuse to grant approval to an authorized institution to
calculate its capital adequacy ratio on a solo-consolidated  basis instead of
a solo basis in respect of a subsidiary of the institution unless the
institution demonstrates to the satisfaction of the Monetary Authority that—

   (a)  the subsidiary is wholly owned by, and managed as if it were an
        integral part of, the institution;

   (b)  the subsidiary is wholly financed by the institution such that the
        subsidiary has no depositors or other external creditors except
        external creditors for—

        (i)    audit fees;

        (ii)   company secretarial services; and

        (iii)  sundry operating expenses; and

   (c)  there are no regulatory, legal or taxation constraints on the transfer
        of the subsidiary's capital to the institution.

(4) Where—

   (a)  an authorized institution has been granted an approval under
        subsection (2)(a); and

        (b)	an event (referred to in this subsection as "relevant event") 
which could reasonably be construed as causing, or potentially causing,
whether by itself or in conjunction with any other event, a subsidiary of the
institution to fall outside subsection (3)(a), (b) or (c), occurs, the
institution shall, as soon as is practicable after the relevant event occurs,
give notice in writing to the Monetary Authority of the relevant  event.