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    HKMA Consults on Guidance on Operational Continuity in Resolution

    February 01, 2021

    HKMA published a consultation on a chapter of the Code of Practice on operational continuity in resolution, or OCIR, under the Financial Institutions (Resolution) Ordinance (Cap. 628)—also known as FIRO. The consultation sets out expectations regarding the ex-ante arrangements that authorized institutions should put in place to secure continuity in resolution. This continuity is with respect to services that are essential to the continued performance of critical financial functions and to support the post-stabilization restructuring in a timely manner. The draft text also provides guidance to authorized institutions on the HKMA approach to resolution planning and resolvability assessment (including the removal of impediments to orderly resolution) in the context of operational continuity in resolution. The consultation is open until April 01, 2021.

    As part of the bilateral resolution planning program, HKMA expects an authorized institution to be able to demonstrate that it has assessed the risks to the operational continuity in resolution and that appropriate arrangements to mitigate these risks are in place or being put in place. The consultation also explains the relationship between critical financial functions, essential services, and preferred resolution strategies. It describes the models typically adopted by authorized institutions for provision of essential services. Additionally, the consultation discusses the matters an authorized institution is expected to consider and address when putting in place the operational continuity in resolution arrangements. The consultation finally sets out the approach of HKMA to implementing these expectations.

    If an authorized institution does not meet the expectations, HKMA may form the opinion that a significant impediment (in relation to the operational continuity in resolution) exists to the orderly resolution of the authorized institution. HKMA may direct the authorized institution to take any measures in relation to its structure (including group structure), operations (including intra-group dependencies), assets, rights, or liabilities that are, in the opinion of HKMA, reasonably required to remove or mitigate the effect of this impediment. The resolution regime under the FIRO reflects the importance of the operational continuity in resolution and empowers HKMA to take appropriate action to support the operational continuity in resolution. In performing, or in considering performing, functions under the FIRO, HKMA must have regard to the resolution objectives. HKMA will consider the operational continuity in resolution when conducting resolution planning and devising strategies for securing an orderly resolution of an authorized institution (or a holding company of the authorized institution) and developing resolution plans to support such strategies. HKMA will also consider t he operational continuity in resolution when conducting a resolvability assessment of an authorized institution (or a holding company of the authorized institution), to determine whether there are any impediments to its orderly resolution.


    Comment Due Date: April 01, 2021


    Keywords: Asia Pacific, Hong Kong, Banking, FIRO, Resolution Framework, Operational Continuity, Resolution Planning, Resolvability Assessment, OCIR, HKMA

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