5.3.1 Regulation Addressed through Business Rules
The application supports multiple pre-configured rules and scenarios based on HKMA specified scenario parameters. The list of preconfigured business rules and the corresponding reference to the regulatory requirement that it addresses are provided in the following section:
Note:
This section provides contextual information about the business rules. For more detailed information, see the OFS LRS application (UI).This list contains only the Rules, which directly correspond to regulatory references. For the complete set of Rules, T2T and Functions, detailed Processes, and Tasks used in HKMA LCR, see the Run Chart.
Table 4-7 Preconfigured HKMA LMR Business Rules
| Sl. No. | Rule Name | Rule Description | Regulatory Requirement Addressed | Regulatory Reference 1. HKMA Banking (Liquidity) Rules Capital 155 Sub leg Q 2. HKMA Capital Rules 155L 3. MA(BS) 1 |
|---|---|---|---|---|
| 1 | LRM - HKMA LMR - Issuer Party Rating Classification - Grade 1 | This rule updates the grade Skey for the issuer based on the issuer type, issuer domicile and issuer rating as Grade 1. | This set of Rules updates the Credit Quality grade of the instrument, based on the issuer. This is done along with Grades 1 to 6. Grade 1 being the highest quality credit grade. | Capital Rules - Schedule 6 |
| 2 | LRM - HKMA LMR - Issuer Party Rating Classification - Grade 2 | This rule updates the grade Skey for the issuer based on the issuer type, issuer domicile and issuer rating as Grade 2. | ||
| 3 | LRM - HKMA LMR - Issuer Party Rating Classification - Grade 3 | This rule updates the grade Skey for the issuer based on the issuer type, issuer domicile and issuer rating as Grade 3. | ||
| 4 | LRM - HKMA LMR - Issuer Party Rating Classification - Grade 4 | This rule updates the grade Skey for the issuer based on the issuer type, issuer domicile and issuer rating as Grade 4. | ||
| 5 | LRM - HKMA LMR - Issuer Party Rating Classification - Grade 5 | This rule updates the grade Skey for the issuer based on the issuer type, issuer domicile and issuer rating as Grade 5. | ||
| 6 | LRM - HKMA LMR - Issuer Party Rating Classification - Grade 6 | This rule updates the grade Skey for the issuer based on the issuer type, issuer domicile and issuer rating as Grade 6. | ||
| 7 | LRM - HKMA LMR - Guarantor Party Rating Classification - Grade 1 | This rule updates the grade Skey for the guarantor based on the guarantor type, guarantor domicile and guarantor rating as Grade 1. | This set of Rules updates the Credit Quality grade of the instrument, based on the Guarantor. This is done along with Grades 1 to 6. Grade 1 being the highest quality credit grade. | Capital Rules - Schedule 6 |
| 8 | LRM - HKMA LMR - Guarantor Party Rating Classification - Grade 2 | This rule updates the grade Skey for the guarantor based on the guarantor type, guarantor domicile and guarantor rating as Grade 2. | ||
| 9 | LRM - HKMA LMR - Guarantor Party Rating Classification - Grade 3 | This rule updates the grade Skey for the guarantor based on the guarantor type, guarantor domicile and guarantor rating as Grade 3. | ||
| 10 | LRM - HKMA LMR - Guarantor Party Rating Classification - Grade 4 | This rule updates the grade Skey for the guarantor based on the guarantor type, guarantor domicile and guarantor rating as Grade 4. | ||
| 11 | LRM - HKMA LMR - Guarantor Party Rating Classification - Grade 5 | This rule updates the grade Skey for the guarantor based on the guarantor type, guarantor domicile and guarantor rating as Grade 5. | ||
| 12 | LRM - HKMA LMR - Guarantor Party Rating Classification - Grade 6 | This rule updates the grade Skey for the guarantor based on the guarantor type, guarantor domicile and guarantor rating as Grade 6. | ||
| 13 | LRM - LMR - Qualifying Issuer Score | This rule classifies the Issuer rating grade score as qualifying as per the HKMA guidelines. | The HKMA guidelines set out the expectations for a 'Qualifying' issuer or guarantor or issue. For example, an issue (security) is qualifying if it has a credit quality grade of 1 or 2. This set of Rules recognize other such qualifying criteria and identify such accounts as qualifying, in accordance with LMR guidelines. | Liquidity Rules - Schedule 5 |
| 14 | LRM - LMR - Qualifying Guarantor Score | This rule classifies the Guarantor rating grade score as qualifying as per the HKMA guidelines. | ||
| 15 | LRM - LMR - Qualifying Issuer Instrument Score | This rule updates the qualifying Issuer Instrument score based on credit quality grade as per the HKMA guidelines. | ||
| 16 | LRM - LMR - Qualifying Guarantor Instrument Score | This rule updates the qualifying Issue score based on credit quality grade as per the HKMA guidelines. | ||
| 17 | LRM - LMR - Qualifying ECAI Rating | This rule classifies the qualifying ECAI score based on qualifying issue score and qualifying party score as per the HKMA guidelines. | ||
| 18 | LRM - HKMA LMR - Liquefiable Asset - Cash , Central Bank Reserves and Gold | This rule reclassifies cash, Central Bank reserves, and Gold as a Liquefiable Asset in accordance with the criteria required for Liquidity Maintenance Ratio as specified by HKMA. | This set of Rules identifies the accounts, which are eligible to be counted under 'Liquefiable assets' as per the LMR guidelines. |
Liquidity Rules Schedule 5, Table A (1)(2)(3) Completion Instruction - A1,A2,A3 |
| 19 | LRM - HKMA LMR - Securities issued by Sovereigns,Central Bank and PSE domiciled in Hong Kong | This rule reclassifies Securities issued by Sovereigns, Central Bank, and PSE domiciled in Hong Kong, in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (6.a.(i)) Completion Instruction - A6 |
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| 20 | LRM - HKMA LMR - Securities guaranteed by Sovereigns, Central Bank and PSE domiciled in Hong Kong | This rule reclassifies Securities guaranteed by Sovereigns, Central Bank, and PSE domiciled in Hong Kong, in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (6. a.(i)) Completion Instruction - A6 |
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| 21 | LRM - HKMA LMR - Export Bills and Residential Mortgage Loans | This rule reclassifies the Export Bills drawn under Letters of Credit and Residential Mortgage Loans as Liquefiable Assets, in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (5) Completion Instruction - A5 |
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| 22 | LRM - HKMA LMR - Rediscountable Bills Drawn under LC | This rule updates the Rediscounted flag in FSI_LRM_INSTRUMENT table for all the export bills that are drawn under the letter of credit. |
Liquidity Rules Schedule 5, Table A (5) Completion Instruction - A5 |
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| 23 | LRM - HKMA LMR - Securities from Banks and state governments | This rule reclassifies Securities from Banks (Central Banks excluded) and State Governments not domiciled in Hong Kong and ECAI Ratings in accordance with the criteria specified by HKMA LMR. |
Schedule 5, Table A (6. b,c,d) Completion Instruction - A6 |
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| 24 | LRM - HKMA LMR - Asset Backed Securities and Other Securities | This rule reclassifies Asset-Backed Securities, Residential Mortgage-Backed Securities, and other Securities as Liquefiable Asset in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (6. e,f,g,h) Completion Instruction - A6 |
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| 25 | HKMA LMR- Listed Ordinary Shares | This rule reclassifies common equity by listed ordinary shares as Liquefiable Assets in accordance with the criteria specified by HKMA. |
Liquidity Rules Schedule 5, Table A (7) Completion Instruction - A7
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| 26 | HKMA LMR - Securities issued by other Government entities maturing within 1 year | This rule reclassifies Securities, maturing within 1 year, issued by Sovereigns, Central Bank, and PSE domiciled in Other Countries, in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (6.b) Completion Instruction - A6 |
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| 27 | HKMA LMR - Securities issued by other Government entities maturing beyond 1 year | This rule reclassifies Securities, maturing beyond 1 year, issued by Sovereigns, Central Bank, and PSE domiciled in Other Countries, in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (6.b) Completion Instruction - A6 |
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| 28 | HKMA LMR - Securities guaranteed by other Government entities maturing within 1 year | This rule reclassifies Securities, maturing within 1 year, guaranteed by Sovereigns, Central Bank, and PSE domiciled in Other Countries, in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (6.b) Completion Instruction - A6 |
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| 29 | HKMA LMR - Securities guaranteed by other Government entities maturing beyond 1 year | This rule reclassifies Securities, maturing beyond 1 year, guaranteed by Sovereigns, Central Bank, and PSE domiciled in Other Countries, in accordance with the criteria specified by HKMA LMR. |
Liquidity Rules Schedule 5, Table A (6.b) Completion Instruction - A6 |
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| 30 | HKMA LMR Liquefiable Assets-Residential mortgage loans | This rule reclassifies the Residential Mortgage Loans as Liquefiable Assets, in accordance with the criteria specified by HKMA LMR. | This set of Rules identifies the accounts, which are eligible to be counted under 'Liquefiable assets' as per the LMR guidelines. |
Liquidity Rules Schedule 5, Table A (5) Completion Instruction - A8 |
| 31 | LRM - HKMA LMR - Qualifying Liabilities for Central Banks | This rule updates the F_QUALIFYING_LIABILITY_FLAG flag in the fsi_lrm_liabilities table for all the central bank parties. | This set of Rules identifies the accounts, which are eligible to be counted under 'Qualifying liabilities' as per the LMR guidelines. |
Liquidity Rules Schedule 5, Table C (1) Completion Instruction - B1 |
| 32 | LRM - LMR - HKMA - Qualifying Liabilities Cashflow Amount | This rule updates outflow amount column in the fsi_lrm_liabilities table for all the central bank parties. |
Liquidity Rules Schedule 5, Table B (1) Completion Instruction - B1 |
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| 33 | LRM - HKMA LMR - Qualifying Liabilities for Other than Banks | This rule updates the F_QUALIFYING_LIABILITY_FLAG flag in the fsi_lrm_liabilities table for all the parties other than the central bank and banks. |
Liquidity Rules Schedule 5, Table C (2) Completion Instruction – B3 |
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| 34 | LRM - HKMA LMR - Qualifying Liabilities for Other than Banks – Derivatives | This rule updates the F_QUALIFYING_LIABILITY_FLAG flag in the fsi_lrm_liabilities table for derivatives as product and all the parties other than the central bank and banks. |
Liquidity Rules Schedule 5, Tab Liquidity Rules Schedule 5, Table C (2) Completion Instruction – B3 le C (2) Completion Instruction – B3
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| 35 | LRM - HKMA LMR - Deductions from Liquefiable Assets | This rule assigns the repline skey for the accounts that are applicable for deductions from the stock of Liquefiable Asset as per the HKMA LMR guidelines. | These Rules identify deductions applicable to the Numerator and denominator of the LMR. |
Liquidity Rules Schedule 5, Table B (1) Completion Instruction - A9 |
| 36 | HKMA LMR - Deductions from Qualifying Liabilities | This rule assigns the repline skey for the accounts that are applicable for deductions from the stock of Qualifying Liabilities as per the HKMA LMR guidelines. |
Liquidity Rules Schedule 5, Table D Completion Instruction - C1-4 |
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| 37 | LRM - HKMA LMR - Capped and Excess Net Due Amount Calculation | This rule computes the Capped Net due Amount and Excess Net due amount and updates in the FCT_LRM_LE_SUMMARY table. If 'Net due from banks' is positive, a certain portion of this amount can be included in the Liquefiable Assets. This portion is capped to 40% of the Qualifying liabilities. After capping what amount is left from Net Due is considered as Excess Net due from Banks. | This Rule identifies the Net Due from Banks, excess net due from banks, and capped amount to be included in the calculation of Liquidity Maintenance Ratio. |
Liquidity Rules Part 8, Paragraphs 43, 48 Table A (4) Completion Instruction - A4 |
| 38 | LRM - HKMA LMR - Total Liquefiable Asset and Total Qualifiable Liability Amount Calculation | This rule computes the Liquefiable Asset Amount post deductions, qualifying liability amount post deductions and updates in the FCT_LRM_LE_SUMMARY table. | This Rule sums up all accounts under liquefiable assets and all accounts under qualifying liabilities as a final step before LMR computation. | Liquidity Rules Part 8 Paragraphs 44 to 47 |