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Results of surveys on selected debt securities and off-balance sheet exposures to derivatives and securitisations

In the 12-month period ending June 2014, authorized institutions (AIs) recorded a moderate growth in their holdings of non-structured debt securities that continued to reflect a preference for a move towards securities issued by sovereigns over those issued by banks. In contrast, AIs’ holdings of structured debt securities continued to decline. In relation to off-balance sheet exposures, there was a significant increase in AIs’ overall derivatives activity during the period, which was mainly attributed to increased foreign exchange positions during the first half of 2014.

The enactment of the Securities and Futures (Amendment) Ordinance in April 2014 has established a broad regulatory framework for the regulation of the over-the-counter (OTC) derivative market. The development of detailed requirements to be set out in subsidiary legislation is in progress.

Introduction

The HKMA introduced two half-yearly surveys in November 2008, the Survey on Selected Debt Securities and the Survey on Off-balance Sheet Exposures in Derivatives and Securitisation Transactions, to help strengthen its oversight of the banking sector’s exposure to structured credit products and OTC derivatives.

In total, 178 AIs 1 participated in the Survey on Selected Debt Securities and 201 AIs 2 participated in the Survey on Off-balance Sheet Exposures in Derivatives and Securitisation Transactions for the 6-month periods ended December 2013 and June 2014. 3 This article presents the results of the surveys.

Highlights of major findings

The surveys found that:

1. The total market value of the selected debt securities 4 held by the surveyed AIs at the end of June 2014 was HK$1,823 billion, 6.7% higher than a year earlier, primarily because of an increase in the holdings of non-structured securities. Holdings of non-structured securities accounted for 96.9% of the selected debt securities held by AIs. In line with the results published in previous years, most of the nonstructured securities were issued by banks, sovereigns and corporates. The selected debt securities were held mainly for investment purposes.

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1 Representing all licensed banks and restricted licence banks in Hong Kong, the total assets of which at the end of June 2014, in the aggregate, accounted for 99.8% of the total assets of the banking sector.

2 Representing all AIs (i.e. licensed banks, restricted licence banks and deposit taking companies) in Hong Kong.

3 The results of the surveys conducted for the positions at the end of December 2012 and June 2013 were published in the HKMA Quarterly Bulletinin December 2013.

4 Selected debt securities are debt securities other than Exchange Fund Bills and Notes, US Treasury bills, notes and bonds, and debt securities issued by multilateral development banks.

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Content provided by Hong Kong Monetary Authority
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