PBC, CBIRC, and CSRC jointly issued the "Guiding Opinions on Improving the Supervision of Systemically Important Financial Institutions (SIFIs)." The guidance clarifies the definition and scope of SIFIs, stipulates the annual evaluation process for identification of SIFIs, and sets out additional regulatory requirements for SIFIs. PBC, CBIRC, and CSRC also published questions and answers (Q&A) on the guidance.
Financial institutions that are deemed to be systemically important shall conduct relevant business activities in compliance with the regulations in the guiding opinions and relevant implementation rules. The guidance improves the supervision of SIFIs by:
- Setting special regulatory requirements for SIFIs to enhance their ability to continue operations and reduce the possibility of major risks. Relevant departments have adopted the corresponding prudential supervision measures to ensure that SIFIs take risks and avoid blind expansion.
- Establishing a special "disposal" mechanism for SIFIs, promoting the formulation of recovery and "disposal" plans, conducting disposition assessments, and ensuring that SIFIs can be safely, quickly, and effectively "disposed of" when they have significant risks.
The guidance also stipulates that SIFIs need to develop a recovery plan, update it annually, and submit it to the crisis management team for review and implementation. The recovery plan is designed to ensure that financial institutions are able to resume normal operations by taking relevant measures under extreme stress scenarios. Recovery plans include, but are not limited to, agency overviews, governance structures for implementing recovery plans, key functions and core business identification, design and analysis of stress scenarios, recovery measures trigger conditions, implementation options, feasibility analysis, implementation barriers, and improvement recommendations. Moreover, the crisis management team will work with SIFIs to develop a disposal plan and update it on an annual basis. Additionally, PBC, along with CBIRC and CSRC, will regularly conduct stress tests on SIFIs and, based on the results of stress tests, impose additional regulatory requirements or take appropriate regulatory measures on SIFIs.
Keywords: Asia Pacific, China, Banking, Insurance, Securities, SIFI, Systemic Risk, Guidance, Recovery and Resolution, Stress Testing, CBIRC, CSRC, PBC
APRA is consulting on the reporting standard for credit risk management (ARS 220.0).
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
ISDA launched the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, with both becoming effective on January 25, 2021.
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
Ambassadors of EU member states agreed on the mandate of European Council on the Capital Markets Recovery Package, to support economic recovery from the COVID-19 crisis.