HKMA Consults on Draft Stay Rules on Financial Contracts Under FIRO
HKMA is consulting, until January 31, 2021, on the draft rules on contractual stays on termination rights in financial contracts for authorized institutions (Stay Rules) to be made under the Financial Institutions (Resolution) Ordinance (Cap. 628)—also known as FIRO. HKMA also released conclusion to its consultation on the Stay Rules that were published in January 2020. After reviewing feedback from the consultation, HKMA has adopted appropriate refinements in developing the draft Stay Rules. In addition, HKMA published a consultation on the revised Supervisory Policy Manual module (IC-6) that specifies the minimum standards that authorized institutions should observe in relation to the sharing and use of consumer credit data through credit reference agencies; this consultation is open until February 01, 2021.
In response to the January consultation on Stay Rules, HKMA had received a total of 14 submissions from industry associations, professional associations, banks, an accounting firm, and law firms. All respondents indicated broad support for the proposed approach to the Stay Rules and provided constructive comments on the proposals set out in the consultation paper. Some sought additional clarity on the details of the proposals in the consultation paper. The Stay Rules require authorized institutions incorporated in Hong Kong and certain of their group companies to include an appropriate provision in certain non-Hong Kong law governed financial contracts to the effect that the parties to the contracts agree to be bound by a temporary suspension of termination rights that may be imposed by HKMA under section 90 of the FIRO.
The Stay Rules are designed to address the cross-border risks to orderly resolution arising from the early termination of financial contracts governed by non-Hong Kong law, in line with the contractual approach to giving effect to cross-border resolution actions advocated by FSB. It is intended to introduce the Stay Rules into the Legislative Council for negative vetting within the current legislative year of 2020-21, with a view to bringing the Stay Rules into operation shortly after the completion of the vetting process in 2021.
Comment Due Date: January 31, 2021/February 01, 2021
Keywords: Asia Pacific, Hong Kong, Banking, Securities, Stay Rules, FIRO, Financial Contract, Resolution Framework, FSB, HKMA
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