The revised Basel III capital standards will take effect on January 1, 2025, prompting the HKMA to adjust how locally incorporated authorized institutions (AIs) calculate regulatory capital for small and medium-sized enterprises (SMEs) and residential mortgage loans. AIs may apply a new 85% risk weight for non-retail SME exposures and adopt updated definitions to support lending. The HKMA will adopt a supportive stance regarding these changes, encouraging AIs to enhance SME financing. Additionally, the risk-weight floor for residential mortgage loans under the IRB approach will be removed to align with the new capital framework. Institutions are encouraged to report relevant SME exposures distinctly and will continue to engage with the HKMA on their SME lending strategies.
Resources: https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2024/20241018e2.pdf