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Hong Kong unveils disclosure guidance

Wednesday 23 November 2011 – by [email protected]

Hong Kong regulators have published interim guidance to bring remuneration disclosure requirements in the financial centre into line with new Basel standards.

Under the new advice, firms based in the Asian jurisdiction are now “encouraged” to make disclosures on at least an annual basis from financial year 2011.

It follows the publication of Pillar 3 disclosure requirements for remuneration by the Basel Committee on Banking Supervision in July.

The Hong Kong Monetary Authority added on Wednesday that it will in due course “take stock” of disclosure practices to determine whether there is a need to incorporate the requirements in formal banking disclosure rules.

A letter from the HKMA says firms should consider implementing the advice, which it admits “to some extent goes beyond” its own requirements – known as its ‘guideline on a sound remuneration system’ manual – or CG-5.

The guidance asks firms to reveal the involvement of external consultants, descriptions of the scope of remuneration policies and the number of meetings held by remuneration committees. It also says that data on employees’ exposure to clawbacks and fluctuations in the value of shares as well as downward revaluations should now be submitted, in line with the Basel standards.

The HMKA says: “Authorised institutions are therefore strongly encouraged to follow the disclosure provisions set out in the Basel Committee’s paper, so far as applicable to them, and insofar as they reasonably can on a proportionate basis, having regard to the extent to which they use incentives-based compensation arrangements and the size, scope, nature and complexity of their business.”

The paper adds however that overseas incorporated firms are not expected to make separate disclosures on their local operations, as long as the information required is already disclosed by their head offices.

It continues: “The Monetary Authority will be taking the necessary steps to amend CG-5 to bring it into line with the Basel Committee’s remuneration disclosure standard, in a manner considered suitable for the local banking sector, and we will provide a revised draft of CG-5 to the industry associations in the near future.”

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