BNM, the central bank of Malaysia, published a policy document that sets out the expectations and policy requirements on the development and maintenance of recovery plans for financial institutions. BNM also published the reporting templates for recover planning. Each financial institution will be required to identify and plan for the execution of a suite of recovery options to restore its long-term viability under a range of idiosyncratic and system-wide stress events. The information and assessment in recovery plans will serve as an important starting point for Perbadanan Insurans Deposit Malaysia (PIDM), which is the resolution authority of licensed banks and licensed Islamic banks, to improve the resolvability of member institutions and operationalize feasible and credible resolution plans. The policy document comes into effect on July 28, 2021.
BNM, in collaboration with PIDM, has established the policy framework to implement recovery and resolution planning for financial institutions in Malaysia, in line with the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institution. The recovery and resolution planning framework seeks to put in place an effective and efficient process to enhance supervision, recoverability, and resolvability of financial institutions, by incorporating essential elements of Key Attribute 11 of the Key Attributes into the domestic regulatory, supervisory, and resolution regimes. The recovery and resolution planning framework aims to:
- facilitate the preparation and maintenance of robust recovery plans by financial institutions that serve as a strategic planning tool that integrates with the risk appetite framework and reinforces risk management functions and strengthens incentives to establish private-sector arrangements to recover from a wide range of stress events.
- enhance capacity and preparedness of supervisory authorities to facilitate ex ante changes to financial institutions’ business structure and operations, support smooth execution of recovery plans, inform calibration of timely intervention and resolution actions to address viability threats, and support effective supervisory cooperation and crisis management arrangements with host and home authorities.
- strengthen capacity and preparedness of resolution authorities to improve resolvability of financial institutions and operationalize feasible and credible resolution plans that preserve continuity of critical functions, promote resolution strategies that minimize risks of loss, and provide for procedural/legal clarity to ensure orderly resolution in home and host jurisdictions.
Effective Date: July 28, 2021
Keywords: Asia Pacific, Malaysia, Banking, Resolution Framework, Recovery and Resolution Planning, Reporting, Islamic Banks, BNM
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The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
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