The Monetary Authority has released a draft of the Banking (Capital) Rules for public consultation. They are planned to come into effect in January, and are the implementing Rules for Basel II, the new international standard for banks' capital adequacy.

They set out in detail the different approaches that can be adopted for calculating the capital charge for credit, market and operational risks. They will be issued under a new rule-making power provided under the Banking (Amendment) Ordinance 2005, and will replace the current regulatory capital regime set out in the third schedule to the Banking Ordinance.

The authority is subject to a statutory duty to consult the Banking Advisory Committee, the Deposit-Taking Companies Advisory Committee, the Association of Banks, the DTC Association and the Financial Secretary when making the rules. They will also be published in the Gazette and be subject to negative vetting by the Legislative Council.

The draft rules, together with an explanatory paper, are available on the authority's website. The consultation period will end on September 2.