HKMA D-SIB Designation 2025: Five Banks, HLA Buckets Unchanged

ByRegReportingDesk

On 31 December 2025 the Hong Kong Monetary Authority completed its annual assessment and confirmed the list of authorized institutions designated as domestic systemically important banks. The HKMA D-SIB designation for 2026 names the same five institutions as a year earlier, and it leaves their Higher Loss Absorbency (HLA) requirements at the levels each already carries. Nothing in the list or the buckets moved from the 31 December 2024 designation.

For the designated banks and international groups whose Hong Kong-incorporated entities sit on the list, an unchanged designation still carries active capital and reporting work. The notified HLA ratio must be included in the calculation of the institution’s regulatory capital buffer level and is met with CET1 capital. When the institution’s net CET1 capital ratio is equal to or below its buffer level, the Banking (Capital) Rules trigger notification and discretionary-distribution constraints; the HLA is a buffer component, not a separate minimum capital ratio. The practical work for 2026 is to confirm the notified HLA ratio, its application basis and the corresponding regulatory-return mapping, while keeping the Hong Kong D-SIB treatment distinct from any group-level G-SIB requirement.

Related reading: Macroprudential Buffer Stacking

The 2025 HKMA D-SIB designation: five AIs, buckets held flat

The Annex to the 31 December 2025 press release sets out the designated institutions and their HLA requirements for 2026. Five authorized institutions are designated, allocated across HLA buckets that run from 1% to 3.5% of Common Equity Tier 1 capital to risk-weighted assets:

  • The Hongkong and Shanghai Banking Corporation Limited: bucket 4, HLA of 2.5%.
  • Bank of China (Hong Kong) Limited: bucket 2, HLA of 1.5%.
  • Standard Chartered Bank (Hong Kong) Limited: bucket 2, HLA of 1.5%.
  • Hang Seng Bank Limited: bucket 1, HLA of 1%.
  • Industrial and Commercial Bank of China (Asia) Limited: bucket 1, HLA of 1%.

The 2% bucket (bucket 3) and the top 3.5% bucket (bucket 5) hold no institution in the 2026 allocation. The framework includes an empty 3.5% bucket to encourage D-SIBs to refrain from becoming even more systemically important. The operative timing points are equally straightforward: the HKMA announced the annual designation on 31 December 2025, with the list and HLA requirements applying for the 2026 calendar year, identical to those set on 31 December 2024. An institution newly designated or moved to a higher bucket has 12 months from formal notification to build the HLA into its regulatory capital buffers; for the five currently designated institutions, no new clock started in this cycle.

Where the HLA sits in the capital buffer

The HLA is a ratio requirement that must be met with CET1 capital. Under the Banking (Capital) Rules, the buffer level for a D-SIB comprises the capital conservation buffer ratio, the countercyclical capital buffer ratio and the applicable HLA ratio, above the minimum capital ratios.

That placement is what gives the HLA its effect. If a designated bank’s net CET1 capital ratio is equal to or below its buffer level, the Banking (Capital) Rules restrict the discretionary distributions the institution may make, requiring it to retain earnings. A bank that reads its HLA as spare headroom for dividends or coupons has the mechanism backwards: the add-on is precisely the layer whose erosion switches distribution constraints on. For the EU analogue of how these systemic, conservation and countercyclical layers surface in own-funds reporting, our note on Pillar 3 disclosure requirements shows how buffer levels are disclosed.

An unchanged list still carries a capital-planning check

A flat designation confirms the existing HLA requirements; the annual reconciliation work remains. Each designated institution must include the notified HLA ratio in the calculation of its buffer level on the applicable basis; as an operational control, it should confirm that ratio against the MA’s notification for each relevant 2026 reporting date. The HLA ratio is met with CET1 and sits above the minimum capital ratios; entering the buffer activates the Banking (Capital) Rules’ notification and distribution-constraint regime without constituting a breach of the minimum capital ratios. The HLA levels announced on 31 December 2025 are unchanged as of 1 January 2026. The HKMA normally conducts the D-SIB identification exercise annually, but it may update the D-SIB list outside the annual cycle in exceptional cases involving important structural changes; the countercyclical capital buffer can also change independently. A change there shifts the buffer level against which the bank’s net CET1 capital ratio is assessed; distribution restrictions apply when the net CET1 capital ratio is equal to or below that level, independently of whether the D-SIB list changes.

Capital planning is where these pieces meet. Capital planning should reflect the notified HLA ratio, the applicable countercyclical capital buffer ratio and the basis on which the MA applies the buffer, so that projected buffer headroom is measured consistently with the regulatory calculation. Firms mapping the same logic in the European framework can compare the approach in our guide to ICAAP and ILAAP. The unchanged 2025 designation is the occasion to reconcile the bucket in your capital plan against the HKMA Annex, not an invitation to skip the reconciliation.

Local D-SIB status is separate from the global G-SIB buffer

Several of the designated institutions belong to large international groups, and this is where the surfaces are easy to blur. The HKMA D-SIB designation under sections 3U and 3V of the Banking (Capital) Rules applies to a locally incorporated authorized institution. The Banking (Capital) Rules permit the MA to specify the unconsolidated or consolidated basis on which the buffer level and maximum distribution percentage apply. CA-B-2 states that, for locally incorporated D-SIBs that are subsidiaries of foreign banking groups, the MA may impose the HLA requirement at the subsidiary and sub-consolidated levels. The institution must therefore follow the application basis specified by the MA under the Banking (Capital) Rules. A group-level G-SIB requirement may coexist at a different consolidation level; if the same authorized institution is designated both a G-SIB and a D-SIB, the higher of the two HLA ratios applies.

An international group must map each notified HLA ratio to the legal entity and regulatory consolidation basis specified by the MA. A home-jurisdiction G-SIB requirement may coexist at a different consolidation level. For a sense of how a comparable systemic-institution list operates elsewhere, the EU runs its own regime, covered in our explainer on the EBA 2026 O-SII list and capital buffer obligations.

The 12-month clock runs from formal notification

The framework gives a newly designated institution a period of 12 months after the formal notification of its designation to include the HLA in the calculation of its regulatory capital buffers. That clock is tied to the notification, not to the calendar year, and it is the operative timing point for any institution that is designated for the first time or moved between buckets.

Because the 2025 designation repeats the 2024 list and the 2024 buckets, no institution starts a fresh 12-month window in this cycle. The banks already designated continue under the requirements they were notified of. Any firm that expects its systemic footprint to grow should still model the 12-month build into its forward capital plan now, so that a future designation or bucket change does not arrive as an unplanned CET1 demand.

Frequently Asked Questions

If our systemic-importance score drifts during the year but the annual list is unchanged, does our bucket change?

The HKMA normally conducts the D-SIB identification exercise annually, but may update the list outside the annual cycle in exceptional cases. The notified HLA continues to apply until the MA issues a new notification. A first designation, re-designation or increase in HLA is subject to a 12-month build-up period, while a lower or nil HLA may be recognised immediately following formal notification.

If an authorized institution is newly designated outside the usual cycle, when does the HLA actually bite?

The HLA must be built into the calculation of the institution’s regulatory capital buffers within 12 months of the formal notification of designation. The 12-month period runs from that notification rather than from year-end, so a mid-cycle designation carries its own deadline.

How does a change in Hong Kong’s countercyclical buffer interact with the HLA?

The HLA ratio and the AI-specific countercyclical capital buffer ratio form part of the buffer level that extends the capital conservation buffer. A change in Hong Kong’s applicable jurisdictional CCyB ratio affects the buffer level through the recalculation of the institution’s AI-specific CCyB ratio under the Banking (Capital) Rules; discretionary-distribution restrictions apply when the institution’s net CET1 capital ratio is equal to or below the resulting buffer level. This operates independently of whether the D-SIB list or HLA buckets change.

For further context, see our analysis of macroprudential buffer stacking (how systemic, conservation and countercyclical buffers combine into a single combined buffer requirement), the EBA 2026 O-SII list and capital buffer obligations, the EBA O-SII buffer opinion on combined systemic buffers, and the internal capital adequacy framework covered in ICAAP and ILAAP.

Key Takeaways

The five designated institutions carry the same HLA into 2026; confirm each entity’s exact bucket against the 31 December 2025 Annex before signing off the capital plan, and verify the notified HLA ratio is reflected in the applicable capital plan and regulatory-return mapping. The HLA is a buffer component, not distributable headroom: discretionary distribution restrictions apply when the bank’s net CET1 capital ratio is equal to or below the buffer level. While the announced HLA levels are unchanged as of 1 January 2026, the HKMA may update the D-SIB list outside the annual cycle in exceptional cases, so monitor both the notified HLA ratio and the current countercyclical capital buffer ratio. D-SIB status applies at the Hong Kong entity level and is independent of any global G-SIB buffer operating at group level. A first designation, re-designation or increased HLA triggers a 12-month build-up period; a lower or nil HLA may be recognised immediately following formal notification, and the unchanged 2025 list introduces no higher HLA requirement for the five listed institutions.

Sources and References

What to confirm before your next capital sign-off

The 31 December 2025 designation confirms the notified HLA requirements applicable to the five listed institutions as of 1 January 2026. As an operational control, each institution should reconcile its bucket against the HKMA Annex, confirm that the notified HLA ratio is reflected in the applicable capital plan and regulatory-return mapping, and use its AI-specific CCyB ratio in buffer projections. Where a separate group-level systemic buffer applies, perform a second reconciliation at that consolidation level and plan the requirements together on their merits, since they operate at different consolidation levels and are not automatically additive.

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.

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