Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 33

Exceptions to section 27

(1) Where—

   (a)  an authorized institution calculates its capital adequacy ratio on a
        consolidated basis; and

   (b)  a subsidiary of the institution which is a member of its
        consolidation group and is incorporated in a country other than Hong
        Kong calculates its capital adequacy ratio on a solo basis in
        accordance with the capital adequacy standards applicable in that
        country, the institution may apply to the Monetary Authority for
        approval to risk-weight the exposures of that subsidiary in accordance
        with those standards instead of in accordance with these Rules.

(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 risk-weight the exposures of
        the subsidiary specified in the application in accordance with the
        capital adequacy standards applicable in the country where the
        subsidiary is incorporated instead of in accordance with these Rules,
        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
risk-weight the exposures of a subsidiary which is a member of the
institution's consolidation group in accordance with the capital adequacy
standards applicable in the country in which the subsidiary is incorporated
instead of in accordance with these Rules unless the institution demonstrates
to the satisfaction of the Monetary Authority that the use of those standards
would not materially prejudice the calculation of the institution's
capital adequacy ratio.

(4) An authorized institution which calculates its capital adequacy  ratio on
a consolidated basis may apply to the Monetary Authority for approval to
calculate that ratio by excluding one or more than one member from its
consolidation group.

(5) Subject to subsection (6), the Monetary Authority shall determine an
application under subsection (4) from an authorized institution by—

   (a)  granting approval to the institution to calculate its capital 
        adequacy ratio by excluding from its consolidation group such members
        of the group as the Monetary Authority specifies and giving the
        institution a section 98(2) requirement to give effect to the
        approval; or

   (b)  refusing to grant the approval.

(6) Without prejudice to the generality of subsection (5)(b), the Monetary
Authority shall refuse to grant approval to an authorized institution to
calculate its capital adequacy ratio by excluding from its consolidation group
any member of the group unless the institution demonstrates to the
satisfaction of the Monetary Authority that the inclusion of that member in
the group—

   (a)  would be inappropriate or misleading; or

   (b)  is not practicable due to regulatory, legal or taxation constraints on
        the transfer of information necessary to enable the institution to
        calculate that ratio on a consolidated basis in respect of that
        member.