HKMA Outlines Consumer Protection Measures for Open API Framework
HKMA published a circular to clarify its expectations on the consumer protection measures of authorized institutions in respect of the Open Application Programming Interface (Open API) framework. The Annex to the circular lists sound consumer protection practices for Open API Phase II and beyond. To strike a balance between innovation and consumer protection, HKMA emphasizes that authorized institutions should adopt a risk-based approach and implement the consumer protection measures that are commensurate with the risks involved.
The circular also clarifies the requirements about engagement of intermediaries by the authorized institutions, as the use of third-party service providers under Open API Framework may constitute the use of intermediaries by authorized institutions. For the avoidance of doubt, Simple Redirection Model is not considered as use of intermediaries by authorized institutions and the authorized institutions should still comply with the HKMA-issued applicable requirements for engagement of intermediaries. Authorized institutions should establish clear liability and settlement arrangement with the partnering third-party service providers for compensating customers’ loss arising from unauthorized transactions, with clear upfront communication to customers. They should also and adhere to the principle that a bank customer should not be responsible for any direct loss suffered by him/her as a result of unauthorized transactions conducted through his/her account attributable to the services offered by the third-party service providers using the Open API of authorized institutions, unless the customer acts fraudulently or with gross negligence.
Authorized institutions are expected to put in place consumer protection measures when implementing the Open API framework. These institutions are expected to uphold consumer protection principles set out in the Code of Banking Practice and comply with other applicable regulatory requirements; this is expected regardless of the underlying technology adopted for the banking products and services and regardless of whether the authorized institutions provide the products and services themselves or in partnership with the third-party service providers.
Keywords: Asia Pacific, Hong Kong, Banking, Open API Framework, Fintech, Open API Phase II, HKMA
Previous Article
CBO Releases Financial Stability Report for 2019Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
