Lenders in Hong Kong will be encouraged but not required to adopt proposed Basel Committee guidelines on capital adequacy standards, according to Hong Kong Monetary Authority deputy chief executive David Carse.
The authority's decision should remove the concerns of some small SAR banks that they might not have the sophisticated risk-assessment systems to follow the guidelines.
The Switzerland-based Basel Committee is an international organisation for central banks that issues standards and guidelines followed in many countries.
Hong Kong follows the Basel Committee's 8 per cent capital adequacy ratio guideline, which requires banks to put HK$8 in their reserves to back up every HK$100 of lending.
The Basel Committee has proposed changing this approach to a risk-based assessment, allowing banks to use different amounts of capital to back loans based on their estimated risk of default.
Mr Carse said the proposal was complicated and the Basel Committee would hold another round of consultation early next year. It might decide to delay the implementation date from 2004 to 2005, he said.
