Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 32

Provisions supplementary to section 31

(1) Subject to subsection (2), an authorized institution which calculates its
capital adequacy ratio on a consolidated basis shall do so using the same
approach in calculating a relevant risk as it would be required to use if it
were calculating that ratio on a solo basis.

(2) With the prior consent of the Monetary Authority, an authorized
institution which calculates its capital adequacy ratio on a consolidated 
basis is not required to comply with subsection (1) if the institution
demonstrates to the satisfaction of the Monetary Authority that it is not
practicable for every member of its consolidation group to use the same
approach to calculate the relevant risk of the group on that basis.

(3) Where an authorized institution which calculates its capital 
adequacy ratio on a consolidated basis uses the BIA approach to calculate its
operational risk—

   (a)  subject to paragraph (b), the institution may, in calculating the
        gross income of its consolidation group in any given year of the last 
        3 years, offset a positive gross income of a member of the group in
        the given year with a negative gross income of another member of the
        group in that given year;

   (b)  the institution shall not, pursuant to paragraph (a), offset a
        positive gross income with a negative gross income between any of the
        last  3 years.

(4) Where an authorized institution which calculates its capital 
adequacy ratio on a consolidated basis uses the STO approach or ASA  approach
to calculate its operational risk—

   (a)  subject to paragraph (b), the institution may, in calculating the
        gross income of its consolidation group in any given year of the last 
        3 years, offset a positive gross income of a
        standardized business line of a member of the group in the given year
        with a negative gross income of that standardized business line of
        another member of the group in that given year;

   (b)  the institution shall not, pursuant to paragraph (a), offset a
        positive gross income with a negative gross income between any of the
        last  3 years.