The Hong Kong Monetary Authority (HKMA) informed that negative vetting of the Financial Institutions (Resolution) (Contractual Recognition of Suspension of Termination Rights—Banking Sector) Rules (also known as Stay Rules), by the Legislative Council, has now expired. The rules will come into operation on August 27, 2021. HKMA had announced, in June 2021, that the Stay Rules have been published in the Hong Kong Gazette.
The requirements under the Stay Rules support the contractual approach to giving effect to cross-border resolution actions; this complements and supports the statutory frameworks, as advocated by FSB in its principles for cross-border effectiveness of resolution actions issued in November 2015. Under the Stay Rules, covered entities must ensure that covered contracts contain a term or condition (made, or evidenced, in writing) to the effect that the parties agree in a legally enforceable manner that the parties (other than an excluded counterparty) will be bound by any suspension of termination rights in relation to the contract that may be imposed by HKMA under section 90(2) of the Financial Institutions (Resolution) Ordinance (Cap. 628).
Effective Date: August 27, 2021
Keywords: Asia Pacific, Hong Kong, Banking, Stay Rules, Interest Rate Swaps, Resolution Framework, Negative Vetting, Derivatives, Contractual Recognition, HKMA
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