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    HKMA Communicates Expectations for Preparation Toward Benchmark Reform

    October 21, 2020

    HKMA issued a circular to authorized institutions on customer protection in respect of the reform of interest rate benchmarks. In the circular, HKMA reminded authorized institutions to make early preparations for the transition to alternative reference rates, to keep abreast of international and local developments of the reform of interest rate benchmarks, and to take these factors into account in their preparation for the transition. In line with this, HKMA reminded authorized institutions about certain customer protection principles for fair treatment of customers and customer communication and education.

    HKMA reminded authorized institutions to uphold customer protection principles in line with the Treat Customers Fairly Charter and other applicable requirements throughout the processes of the reform and transition of interest rate benchmarks. Authorized institutions are reminded to act with due skills, care, and diligence in their approaches to the transition of interest rate benchmarks and when making decisions impacting customers, to reduce conduct risks. Authorized institutions are also reminded to manage the customer impact of the transition ahead of end of 2021, including identifying the extent of their clients’ exposures and ensuring that the associated risks of their clients are assessed and managed.

    The circular states that authorized institutions are expected to develop robust customer communication programs for consumer education and outreach. They should be conducted through appropriate channels such as newsletters and frequently asked questions (FAQs). Authorized institutions should also provide customers with appropriate and accessible channels to make enquiries and complaint, and put in place relevant handling mechanisms/procedures, which should be proper and fair. Authorized institutions should also provide sufficient training and up-to-date information to all relevant frontline staff to ensure their relevant staff have adequate knowledge and competence to appropriately handle communications with customers.

     

    Keywords: Asia Pacific, Hong Kong, Banking, Securities, Interest Rate Benchmarks, Conduct Risk, LIBOR, HIBOR, Benchmark Reforms, Alternative Reference Rates, HKMA

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