Speech at Panel on Financial Affairs

III Company re-domiciliation regime

Application eligibility and requirements

Members noted that if a company was not required under the laws of its original domicile to obtain its members’ consent for re-domiciliation, it must fulfil the following two requirements: (i) its members had consented to the re-domiciliation by a resolution that had been passed by at least 75% of the members entitled to vote on the resolution; and (ii) its members had been given at least 21 days’ notice of the meeting concerned and the proposed resolution. In this connection, members suggested that consideration be given to raising the required passage by at least 75% of members’ votes to 100%, so to avoid any disputes arising from the re-domiciliation. Enquiries were also raised about the threshold of 75% of votes in comparison with other jurisdictions. Given that the notice period for removing auditors under CO was 28 days, members enquired why the notice period for re-domiciliation, which was of greater significance, was set at 21 days only.

The Administration advised that under the proposed company re-domiciliation regime, if a company was not required under the laws of its original domiciles to obtain its members’ consent for re-domiciliation, the requirements under CO for calling general meetings and passing special resolutions would apply, i.e. at least 21 days’ notice given and passage by at least 75% of votes obtained. In the light of the comments received during the consultation period, the Administration was considering relaxing the requirements.

Tax and transitional arrangements

Members enquired about the reasons for the Administration’s proposal to amend IRO to empower the Inland Revenue Department to address transitional tax matters of re-domiciled companies, instead of stipulating in IRO the tax liabilities of these companies.

The Administration clarified that instead of empowering the Commissioner of Inland Revenue to impose additional requirements on a case-by-case basis, matters relating to the transitional tax arrangements would be set out in special provisions in IRO.

IV Implementation of the Basel III final reform package

Key updates of the Basel III final reform package

Members sought explanation on the reasons why the focus of the initial phases of Basel III implementation was on the capital base component in the calculation of banks’ minimum capital requirements (i.e. emphasizing the quality and quantity of capital), while B3F focused on the way in which the risk-weighted amount of exposures was calculated.

HKMA pointed out that the initial phases of Basel III implementation focused first and foremost on the capital base component because the standards for capital base were easier to deal with. For example, it was possible to require banks to implement certain requirements relating to their capital buffer and loss-absorbing capacity within a short period of time. As for risk-weighted assets (“RWA”), which were highly technical and complex involving risk calculation methodologies of various banking business under different scenarios, it would be more appropriate to deal with RWA at a later stage.

Implementation timeline

Members pointed out that the United States had yet to formally announce its implementation timeline of B3F, while Australia, the European Union, the United Kingdom and Singapore, which had announced their implementation timelines, all had target dates later than that of Hong Kong. Given that some financial institutions of these countries had branches set up in Hong Kong, members enquired how the Administration would deal with cases where the parent companies of these financial institutions had yet been subject to B3F regulation, while their branches in Hong Kong were required to comply with B3F requirements. In addition, members expressed concern about the proposal to implement B3F on a date no earlier than 1 January 2024, and urged the Administration to ensure that B3F would not be implemented in Hong Kong ahead of other jurisdictions, so as to maintain the city’s competitiveness.

HKMA advised that in determining the actual timing for implementing B3F in Hong Kong, it would closely monitor the implementation timelines of B3F in other major jurisdictions and the progress of local banks’ preparations for the implementation of B3F, so as to avoid as far as possible cases of inconsistencies in regulatory standards for parents and branches of financial institutions and ensure Hong Kong’s competitiveness. HKMA’s current plan was to implement B3F on a date no earlier than 1 January 2024. The Administration advised that it would maintain liaison with the banking industry and exercise flexibility over the implementation date of B3F upon the establishment of the relevant policy framework.