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IMF Country Report No. 21/117
PEOPLE’S REPUBLIC OF CHINA– HONG KONG SPECIAL ADMINISTRATIVE REGION
FINANCIAL SECTOR ASSESSMENT PROGRAM
TECHNICAL NOTE—SYSTEMIC RISK OVERSIGHT AND MACROPRUDENTIAL POLICIES
June 2021
This Technical Note on Systemic Risk and Oversight and Macroprudential Policies for the People’s Republic of China–Hong Kong Special Administrative Region FSAP was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed in June 2021.
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Title page
PEOPLE’S REPUBLIC OF CHINA—HONG KONG SPECIAL ADMINISTRATIVE REGION
FINANCIAL SECTOR ASSESSMENT PROGRAM
TECHNICAL NOTE
SYSTEMIC RISK OVERSIGHT AND MACROPRUDENTIAL POLICIES
June 7, 2021
Prepared By
Monetary and Capital Markets Department
This Technical Note was prepared by IMF staff in the context of the Financial Sector Assessment Program in People’s Republic of China—Hong Kong Special Administrative Region, led by Ananthakrishnan Prasad. It contains technical analysis and detailed information underpinning the FSAP’s findings and recommendations. Further information on the FSAP can be found at http://www.imf.org/external/np/fsap/fssa.aspx
Contents
Glossary
EXECUTIVE SUMMARY
INTRODUCTION
INSTITUTIONAL ARRANGEMENTS
A. Overview of the Current Framework
B. Agencies in Charge of MaPP in the Hong Kong SAR
C. Domestic Interagency Coordination and Cooperation
D. Communication Strategies of Macroprudential Policies
E. Systemic Risk Identification and Monitoring
F. Recommendations to Strengthen the Institutional Framework for MaPP
SYSTEMIC RISKS AND MACROPRUDENTIAL TOOLKIT
A. Vulnerabilities of Rising Household Debt and Elevated Housing Prices
B. Calibration of Macroprudential Policies in the Housing Sector
C. Effectiveness of Macroprudential Policies on Housing Sector
D. Vulnerabilities of Corporate Exposure to Offshore MC Borrowers
FIGURES
1. Calibration of HKMA MaPP on Housing Sector
2. MC Loan by Sector
3. Household Debt
4. Housing Market and Residential Mortgage
5. Offshore Non-Bank Bond of Mainland China Borrowers
6. Hong Kong Bank Lending to Mainland China Borrowers
TABLES
1. Key Recommendations
2. Macroprudential Policy Committees (CFR and FSC)
3. Shared Macroprudential Responsibility Among Regulators and Government Agencies
4. Major Systemic Risk Monitoring Tools
5. International Comparison of Macroprudential Institutional Setup
6. Selected Country Experience to Deal with Mortgage Lending by NBFIs
7. Comparison of MaPP on Residential Mortgage in AE with Housing Boom
8. Multimodal Logit Regression Analysis of MaPP Stance Volume
9. Effect of Macroprudential Polices on LTV, Mortgage Growth and Housing Price
References
ANNEX
I. Summary of Property Market Measures Introduced
Glossary
| AI | Authorized (deposit-taking) Institution |
| BIS | Bank for International Settlements |
| CAR | Capital Adequacy Ratio |
| CET1 | Common Equity Tier 1 Capital Ratio |
| CFR | Council of Financial Regulators |
| CCyB | Counter Cyclical Capital Buffer |
| CRE | Commercial Real Estate |
| DSTI | Debt Service to Income Ratio |
| FS | Financial Secretary |
| FSC | Financial Stability Committee |
| FSTB | Financial Services and the Treasury Bureau |
| GDR | Granular Data Reporting Initiative |
| GFC | Global Financial Crisis |
| HKMA | Hong Kong Monetary Authority |
| MA | Monetary Authority |
| IA | Insurance Authority |
| IO | Insurance Ordinance |
| LegCo | Legislative Council |
| LTV | Loan-to-Value Ratio |
| MaPP | Macro Prudential Policies |
| MAS | Monetary Authority of Singapore |
| MoU | Memorandum of Understanding |
| NBFI | Non-Bank Financial Intermediary |
| NDFC | Non-deposit Taking Finance Company |
| OECD | Organization for Economic Cooperation and Development |
| PSSVFO | Payment Systems and Stored Value Facilities Ordinance |
| SFC | Securities and Futures Commission |
| SFST | Secretary for Financial Services and the Treasury |
| THB | Transport and Housing Bureau |
| RMBS | Residential Mortgage Backed Security |