HKMA Issues Note on LIBOR Transition and Proposal on Resolution Regime
The Hong Kong Monetary Authority (HKMA) is consulting the banking industry on the draft Section 196 of the Financial Institutions (Resolution) Ordinance (Cap. 628) (FIRO) Code of Practice Chapter ST-1 on contractual recognition of suspension of termination rights. Chapter ST-1 aims to provide guidance on how the Resolution Authority intends to exercise certain discretionary powers under, and on the operation of certain provisions in, the Financial Institutions (Resolution) (Contractual Recognition of Suspension of Termination Rights – Banking Sector) Rules (also known as the Stay Rules). The consultation period ends on September 09, 2021. Additionally, HKMA published a circular announcing that it has updated the explanatory note on LIBOR transition for authorized institutions, which HKMA expects the authorized institutions to share with the relevant corporate customers by July 31, 2021
The note is intended to give a further push to promote the corporate sector’s awareness of the LIBOR transition. HKMA and the Treasury Market Association (TMA) jointly developed and published is leaflet in July 2020. The leaflet a self-explanatory note about LIBOR transition in the form of questions and answers (Q&A) to impress upon corporates the need to make early preparations. Institutions distributed this note to the corporate customers in the third quarter of 2020. Overseas authorities have now confirmed that most LIBOR settings will be discontinued starting from January 01, 2022. To ensure a smooth transition, bank regulators worldwide, including HKMA, have required banks to cease entering into new LIBOR contracts after 2021. Given the recent developments, HKMA and the TMA have updated the Q&A and developed a leaflet to enhance awareness of corporate sector on the transition and its implications for them. HKMA is now requesting institutions to distribute the enclosed leaflet to all their corporate customers that have outstanding LIBOR-linked contracts with them by July 31, 2021. The leaflet states that bank customers will have to reference alternative interest rates in any new contracts with banks from January 01, 2022 onward.
Comment Due Date: September 09, 2021
Keywords: Asia Pacific, Hong Kong, Banking, LIBOR, FIRO, Benchmark Reforms, Corporates, Resolution Framework, Resolution Planning, Chapter ST-1, Contractual Recognition, Stay Rules, HKMA
Previous Article
ESMA to Amend Derivatives Obligations Owing to Benchmark TransitionRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
