The Hong Kong Monetary Authority (HKMA) is consulting the banking industry on the draft Section 196 of the Financial Institutions (Resolution) Ordinance (Cap. 628) (FIRO) Code of Practice Chapter ST-1 on contractual recognition of suspension of termination rights. Chapter ST-1 aims to provide guidance on how the Resolution Authority intends to exercise certain discretionary powers under, and on the operation of certain provisions in, the Financial Institutions (Resolution) (Contractual Recognition of Suspension of Termination Rights – Banking Sector) Rules (also known as the Stay Rules). The consultation period ends on September 09, 2021. Additionally, HKMA published a circular announcing that it has updated the explanatory note on LIBOR transition for authorized institutions, which HKMA expects the authorized institutions to share with the relevant corporate customers by July 31, 2021
The note is intended to give a further push to promote the corporate sector’s awareness of the LIBOR transition. HKMA and the Treasury Market Association (TMA) jointly developed and published is leaflet in July 2020. The leaflet a self-explanatory note about LIBOR transition in the form of questions and answers (Q&A) to impress upon corporates the need to make early preparations. Institutions distributed this note to the corporate customers in the third quarter of 2020. Overseas authorities have now confirmed that most LIBOR settings will be discontinued starting from January 01, 2022. To ensure a smooth transition, bank regulators worldwide, including HKMA, have required banks to cease entering into new LIBOR contracts after 2021. Given the recent developments, HKMA and the TMA have updated the Q&A and developed a leaflet to enhance awareness of corporate sector on the transition and its implications for them. HKMA is now requesting institutions to distribute the enclosed leaflet to all their corporate customers that have outstanding LIBOR-linked contracts with them by July 31, 2021. The leaflet states that bank customers will have to reference alternative interest rates in any new contracts with banks from January 01, 2022 onward.
Comment Due Date: September 09, 2021
Keywords: Asia Pacific, Hong Kong, Banking, LIBOR, FIRO, Benchmark Reforms, Corporates, Resolution Framework, Resolution Planning, Chapter ST-1, Contractual Recognition, Stay Rules, HKMA
Previous ArticleESMA to Amend Derivatives Obligations Owing to Benchmark Transition
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
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.
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.
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.
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.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
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.
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.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
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.