HKMA announced that the Financial Institutions (Resolution) (Contractual Recognition of Suspension of Termination Rights—Banking Sector) Rules (also known as Stay Rules) have been published in the Hong Kong Gazette. An initial period of 24 or 30 months (depending on the counterparty types) beginning from the day on which the Stay Rules come into operation has been provided for covered entities to achieve compliance with the Stay Rules. The Stay Rules will be tabled before the Legislative Council for negative vetting on July 07, 2021. Subject to the views of the Legislative Council, the subsidiary legislation should come into operation on August 27, 2021.
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).
In addition, HKMA and the Securities and Futures Commission (SFC) issued conclusions of a joint consultation on the annual update to the list of financial services providers under the over-the-counter (OTC) derivatives clearing regime in Hong Kong. Having considered the market feedback, HKMA and SFC will proceed with the proposed changes to the list as set out in the joint consultation paper. The list includes entities that belong to a group of companies appearing on the list of global systemically important banks (G-SIBs) or on the list of dealer groups which undertook to the OTC Derivatives Supervisors Group to work collaboratively with central counterparties, infrastructure providers, and global supervisors to continue to make structural improvements to the global OTC derivatives markets (G15 dealers). The list also includes members of the largest central counterparties offering clearing for interest rate swaps in the US, Europe, Japan, and Hong Kong. HKMA and SFC will Gazette the updated list of financial services providers during the fourth quarter of 2021, for implementation on January 01, 2022.
Effective Date: August 27, 2021
Keywords: Asia Pacific, Hong Kong, Banking, Securities, Stay Rules, OTC Derivatives, Financial Service Providers, G-SIBs, Central Counterparty, Interest Rate Swaps, Resolution Framework, SFC, HKMA
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