Monetary Authority Announces Countercyclical Capital Buffer Ratio for Hong Kong

On 3 May, the Monetary Authority of Hong Kong declared that the countercyclical capital buffer (CCyB) ratio for the region would remain unchanged at 1%. Mr Eddie Yue, the Monetary Authority, stated that the quantitative indicators indicate that overheating risks in Hong Kong are well under control. Considering the Positive Neutral CCyB introduced on 1 April 2024, a 1% CCyB ratio is deemed appropriate for Hong Kong when systemic risks are neither subdued nor elevated. Therefore, the decision was made to maintain the CCyB ratio at 1% while closely monitoring the situation. The determination of the CCyB ratio for Hong Kong involves assessing various quantitative indicators and qualitative information, including an “indicative buffer guide” that provides guidance based on the gap between the credit-to-GDP ratio and its long-term trend, as well as the ratio of residential property prices to rentals and its long-term trend. The latest indicative buffer guide, calculated using data from 2023Q4 and the Positive Neutral CCyB according to the revised formula, indicates a CCyB of 1%. The projection based on all available data suggests that the indicative buffer guide is likely to signal a 1% CCyB when relevant data for 2024Q1 become available. The decision to maintain the 1% CCyB ratio takes into account not only the indicative buffer guide but also a range of other reference indicators. Resources: https://www.hkma.gov.hk/eng/news-and-media/press-releases/2024/05/20240503-6/