Increased focus on board and senior management in Hong Kong as HKMA issues enhanced guidance on corporate governance

On 6 October 2017, the Hong Kong Monetary Authority (HKMA) issued a circular to announce the publication of two revised Supervisory Policy Manual (SPM) modules, namely CG-1 “Corporate Governance of Locally Incorporated Authorised Institutions” and IC-1 “Risk Management Framework”. Revisions were made to the modules to incorporate guidelines issued by the Basel Committee on Banking Supervision and the Financial Stability Board on corporate governance and risk management principles, thereby bringing Hong Kong more in line with international standards.

Impacted authorised institutions (AIs) will be expected to implement the new requirements with effect from 1 January 2018.

Corporate governance and senior management accountability continue to be hot topics in Hong Kong (as well as globally) since the Securities and Futures Commission issued its circular on the Manager in Charge regime in December 2016 (please see our briefing on this topic here). The HKMA has also issued the following guidance in relation to corporate governance:

• circular providing further guidance on the empowerment of Independent Non-Executive Directors (INEDs) in the banking industry in Hong Kong dated 14 December 2016 (please see our briefing on this topic here);
• circular providing guidance to AIs on developing and promoting a sound corporate culture dated 2 March 2017; and
• circular launching a new On-boarding Programme for INEDs of locally incorporated AIs dated 11 October 2017.

Our recent e-bulletin, which highlights the key changes to the SPM modules CG-1 and IC-1, can be found here. If you would like to discuss this further, please do not hesitate to reach out to our Hong Kong team (the contact details of which are included in the e-bulletin) or your usual Herbert Smith Freehills contact.