{"id":1137,"date":"2025-08-07T08:02:17","date_gmt":"2025-08-07T08:02:17","guid":{"rendered":"https:\/\/iqeq.com\/hk\/insights\/sfcs-consultation-on-financial-risk-rules-key-implications-for-internal-models-and-risk-governance\/"},"modified":"2025-08-26T07:49:11","modified_gmt":"2025-08-26T07:49:11","slug":"sfcs-consultation-on-financial-risk-rules-key-implications-for-internal-models-and-risk-governance","status":"publish","type":"post","link":"https:\/\/iqeq.com\/hk\/insights\/sfcs-consultation-on-financial-risk-rules-key-implications-for-internal-models-and-risk-governance\/","title":{"rendered":"SFC\u2019s consultation on financial risk rules: Key implications for internal models and risk governance\u00a0"},"content":{"rendered":"
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By Philippa Allen, Managing Director, Regulatory Compliance, Asia<\/span><\/i>\u00a0<\/span><\/p>\n

On 14 July 2025, the Hong Kong Securities and Futures Commission (SFC) released a consultation paper<\/a> proposing significant updates to the Financial Resources Rules (FRR), along with new guidelines on the internal models approach (IMA) and model risk management (MRM). The proposed reforms aim to align Hong Kong\u2019s capital and risk framework with international standards, particularly Basel III, while enhancing governance expectations and market access for licensed corporations (LCs), especially those involved in over-the-counter derivatives (OTCD).\u00a0<\/strong><\/p>\n

To help you navigate the proposed changes, we\u2019ve outlined the key highlights and their practical implications below.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n <\/div>\n<\/section>\n\n

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1. Fine-tuning and updates to the framework<\/p>\n

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The SFC is proposing a tiered capital structure for OTCD firms based on business model and risk profile. The following refinements aim to reduce unnecessary capital drag while addressing previous industry feedback:<\/span>\u00a0<\/span><\/p>\n