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
Previous Article
CMF Consults on Reporting Requirements for Basel III StandardsRelated Articles
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
FSB Reports Assess NBFI Sector and Progress on LIBOR Transition
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.