HKMA Consults on Guidance on Operational Continuity in Resolution
HKMA published a consultation on a chapter of the Code of Practice on operational continuity in resolution, or OCIR, under the Financial Institutions (Resolution) Ordinance (Cap. 628)—also known as FIRO. The consultation sets out expectations regarding the ex-ante arrangements that authorized institutions should put in place to secure continuity in resolution. This continuity is with respect to services that are essential to the continued performance of critical financial functions and to support the post-stabilization restructuring in a timely manner. The draft text also provides guidance to authorized institutions on the HKMA approach to resolution planning and resolvability assessment (including the removal of impediments to orderly resolution) in the context of operational continuity in resolution. The consultation is open until April 01, 2021.
As part of the bilateral resolution planning program, HKMA expects an authorized institution to be able to demonstrate that it has assessed the risks to the operational continuity in resolution and that appropriate arrangements to mitigate these risks are in place or being put in place. The consultation also explains the relationship between critical financial functions, essential services, and preferred resolution strategies. It describes the models typically adopted by authorized institutions for provision of essential services. Additionally, the consultation discusses the matters an authorized institution is expected to consider and address when putting in place the operational continuity in resolution arrangements. The consultation finally sets out the approach of HKMA to implementing these expectations.
If an authorized institution does not meet the expectations, HKMA may form the opinion that a significant impediment (in relation to the operational continuity in resolution) exists to the orderly resolution of the authorized institution. HKMA may direct the authorized institution to take any measures in relation to its structure (including group structure), operations (including intra-group dependencies), assets, rights, or liabilities that are, in the opinion of HKMA, reasonably required to remove or mitigate the effect of this impediment. The resolution regime under the FIRO reflects the importance of the operational continuity in resolution and empowers HKMA to take appropriate action to support the operational continuity in resolution. In performing, or in considering performing, functions under the FIRO, HKMA must have regard to the resolution objectives. HKMA will consider the operational continuity in resolution when conducting resolution planning and devising strategies for securing an orderly resolution of an authorized institution (or a holding company of the authorized institution) and developing resolution plans to support such strategies. HKMA will also consider t he operational continuity in resolution when conducting a resolvability assessment of an authorized institution (or a holding company of the authorized institution), to determine whether there are any impediments to its orderly resolution.
Comment Due Date: April 01, 2021
Keywords: Asia Pacific, Hong Kong, Banking, FIRO, Resolution Framework, Operational Continuity, Resolution Planning, Resolvability Assessment, OCIR, HKMA
Related 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.
