Living wills regulatory reform in Asia Pacific

This table provides an overview of the progress of regulatory reform in the area of living wills across a number of Asia Pacific jurisdictions. The information is current as at 6 October 2016. No. Jurisdiction Regulators/ authorities Comments 1 Hong Kong Hong Kong Monetary Authority (HKMA) • The HKMA issued a confidential consultation paper on recovery and resolution planning (RRP) on 20 November 2012 (the HKMA RRP Consultation Paper). The HKMA RRP Consultation Paper requested authorised institutions (AIs) to submit responses to 24 questions in relation to the implementation of RRP in Hong Kong by 18 January 2013. The HKMA RRP Consultation Paper, and responses/conclusions thereto, are not publicly available. • On 24 March 2014, the HKMA issued a consultation paper on establishing and implementing a regulatory and supervisory framework for: (i) identifying and designating AIs as domestic systemically important banks (D-SIBs) in Hong Kong; and (ii) applying a range of prudential and supervisory requirements to the AIs so designated (the HKMA D-SIB Consultation Paper).1 The deadline for responses to the 18 questions set forth in the HKMA D-SIB Consultation Paper was 26 May 2014. • The HKMA on 24 March 2014 stated in letters to industry bodies2 in similar terms that following the HKMA D-SIB Consultation Paper, the HKMA will develop and refine its proposals, taking into account the comments received, for the purposes of: (i) producing a Supervisory Policy Manual (SPM) module on the operation of the framework; and (ii) amending its Banking (Capital) Rules and Banking (Disclosure) Rules to recognise both D-SIB and global systemically important bank (G-SIB) designation and provide for the consequent application of higher loss absorbency (HLA) requirements. • On 20 June 2014, the HKMA issued a SPM module on recovery planning (RE-1) 3, which provides guidance to AIs on key elements of effective recovery planning, and sets out the HKMA’s approach to, and expectations in, reviewing AIs’ recovery plans. Under RE-1, AIs are expected to develop and maintain a recovery plan commensurate with the nature, scale and complexity of their operations. RE-1 envisions that it would be necessary in most cases for AIs that are part of a global group to prepare a local recovery plan in respect of Hong Kong operations, although the group level recovery plan could be drawn upon where appropriate. RE-1 states that the HKMA will adopt a phased approach with priority given to AIs which are more systemically significant or critical in Hong Kong, and that the first ‘wave’ of the most systemically and critical AIs will be notified by the HKMA to submit a recovery plan within 6 months of the notification. The first wave of larger, more complex AIs submitted their first recovery plans in December 2014.4 • On 18 February 2015, the HKMA published a SPM module entitled ‘Systemically Important Banks’ (CA-B-2) 5, following a consultation in October 2014. CA-B-2 sets out the HKMA’s assessment methodology for identifying D-SIBs, calibrates the level of HLA requirements to which they will be subject, and sets out other policy and supervisory measures to be applied to them. Under CA-B-2, the HKMA will review the list of D-SIBs at least annually, and AIs which the HKMA proposes to designate as D-SIBs will be consulted before the designations are finalised and publicised. In the context of recovery planning, CA-B-2 states that AIs, in particular larger or more complex AIs (which will include D-SIBs), are encouraged to adopt more than the minimum scenarios as prescribed in RE-1 to ensure the adequacy of their recovery plans. Endnotes begin on page 20 Living wills regulatory reform in Asia Pacific FSbriefing 2 No. Jurisdiction Regulators/ authorities Comments • On 16 March 2015, the HKMA designated five Hong Kong incorporated banks as D-SIBs.6 Each of the designated banks is required to include a HLA requirement into the calculation of their regulatory capital buffers within 12 months. The HKMA intends to phase in the full amount of the HLA requirement from 2016 to 2019 in parallel with the Capital Conservation Buffer and Countercyclical Capital Buffer. Under the phase-in provisions, the levels of HLA for 2016 will be within a range of 0.25% to 0.875% but will ultimately range between 1% and 3.5% depending on the assessed level of the D-SIB’s systemic importance. • The HKMA, in its 2014 Annual Report published on 24 April 2015, stated in its ‘Plans for 2015 and Beyond’ that the HKMA would continue to work closely with the Financial Services and the Treasury Bureau (FSTB), the Securities and Futures Commission (SFC) and the Insurance Authority (IA) on proposals to establish a cross-sectoral resolution regime for financial institutions in Hong Kong. After considering submissions received in response to the second public consultation exercise, as well as any further developments at the international level including any guidance on recognition of cross-border resolution actions, the proposals will be further refined with a view to introducing a bill into the Legislative Council by the end of 2015. The HKMA also stated that it will continue its involvement in crisis management groups for a number of G-SIBs with sizeable operations in Hong Kong, where work is underway to develop firm-specific group-level recovery and resolution plans.7 • On 31 December 2015, the HKMA completed its annual assessment of the list of designated D-SIBs. Based on the assessment results, the list of banks designated as D-SIBs remains unchanged compared to the first list of D-SIBs published by the HKMA on 16 March 2015. The HKMA intends to update the list annually. Under the phase-in provisions, the levels of HLA for 2017 will be increased to the range of 0.50% to 1.75% (from a range of 0.25% to 0.875% in 2016).8 • In the December 2015 issue of the HKMA's Quarterly Bulletin9, the HKMA notes that in light of the Financial Stability Board (FSB) continuing to develop guidance and standards on various aspects of resolution, such as the recently finalised standard on the Total Loss-Absorbing Capacity (TLAC) of G-SIBs10 and recently issued set of guiding principles to promote the cross-border effectiveness of resolution actions11, it is expected that further measures, such as rules, regulations and a code of practice, will be developed alongside the legislative proposals set out in the HK Resolution Bill in order to make the Hong Kong regime fully operable. The HKMA further notes that the authorities will continue to monitor international developments and are committed to engaging stakeholders in developing the proposed resolution regime. • On 22 April 2016, the HKMA published a draft SPM on resolution planning (RE-2) for consultation.12 RE-2 provides an overview of the HKMA’s approach to resolution planning and details the scope and content of the core information required in the initial stage of resolution planning. RE-2 also explains how the HKMA will conduct supervisory assessment of the core information submitted. The Annex of RE-2 details the requested information in relation to five function categories (i.e. deposits, lending and loan servicing, payments, clearing, custody and settlement, wholesale funding markets and capital markets & investments) that may potentially be considered to be critical financial functions. It is clear from RE-2 that, after receiving the core information from an AI, the HKMA will discuss with the AI an indicative preferred resolution strategy. The HKMA also recognises the need to cooperate with overseas resolution authorities for AIs with significant overseas presence. 3 No. Jurisdiction Regulators/ authorities Comments Financial Services and the Treasury Bureau of the Hong Kong Government (FSTB) • The FSTB, in conjunction with the HKMA, the SFC and the IA, on 7 January 2014 published a 141-page public consultation paper on proposals for a resolution regime for certain banks, securities and futures companies, insurers and financial markets infrastructures (FMIs) in Hong Kong. The deadline for providing feedback was 6 April 2014. The FSTB noted in the consultation paper that there will be a second consultation exercise on these policy issues later in 2014, with a view to introducing a bill into the Legislative Council in 2015.13 • The FSTB, in conjunction with the HKMA, the SFC and the IA, on 21 January 2015, published a 145-page second consultation paper and conclusions from the first consultation on proposals for a resolution regime. The deadline for providing feedback was 20 April 2015. Among other things, the second consultation paper included further details on the resolution options and powers proposed in the first consultation paper, the governance arrangements and especially the approach to designating resolution authorities and safeguards including a ‘no creditor worse off than in liquidation’ compensation mechanism. The paper notes that as work is still continuing at the international level to provide guidance on the implementation of certain aspects of the new standards, there is expected to be a third shorter consultation later in 2015 (but see more recent information below), which would focus on the following issues in particular: i. the ‘bail-in’ resolution option and local implementation of the FSB framework for TLAC; ii. cross-border resolution actions; iii. the funding mechanism; and iv. the protection of client assets in resolution.14 • The FSTB, in conjunction with the HKMA, the SFC and the IA, on 9 October 2015, published a 66-page paper which set forth the authorities’ conclusions in respect of the proposals in the second consultation paper and certain further issues that were referenced in the second consultation paper as remaining under development internationally. No further specific questions were asked in the paper, but the paper invited anyone with substantive issues regarding the contents of the paper to raise those issues directly with the authorities. The paper also reaffirmed the authorities’ intention to submit a bill to the Hong Kong Legislative Council by the end of 2015. The paper noted that the authorities intend to continue to engage with various stakeholders throughout the legislative process and thereafter as they develop and issue rules, codes of practice and guidance on various aspects of the resolution regime.15 • On 20 November 2015, the Financial Institutions (Resolution) Bill (HK Resolution Bill) was published in the Hong Kong Gazette. The HK Resolution Bill had its first formal reading in the Hong Kong Legislative Council on 2 December 2015 and was passed as the Financial Institutions (Resolution) Ordinance (Resolution Ordinance) on 22 June 2016.16 The Resolution Ordinance will come into operation on a day to be appointed by the Secretary for Financial Services and the Treasury by notice published in the Gazette, pending the Legislative Council’s passing of certain subsidiary legislation under the Ordinance. The Resolution Ordinance provides for a resolution regime for all authorised institutions, certain SFC-licensed corporations, certain insurers, and certain financial market infrastructures and exchanges in Hong Kong. Under the Resolution Ordinance, the HKMA, the SFC and the IA are designated to be the resolution authorities for the banking sector, securities and futures sector and insurance sector, respectively. A resolution authority may conduct resolvability assessments on financial institutions that are within the scope of the regime with a view to identifying any barriers that could prevent or impede the orderly resolution of the institutions so that such barriers may be removed. If an institution becomes non-viable for the purposes of the Resolution Ordinance, the resolution authority may take certain resolution actions, including imposing a statutory bail-in of the institution’s liabilities, transferring businesses/assets to a bridge institution, selling all or part of the institution to a purchaser, transfers to an asset management vehicle, or transfers to temporary public ownership. 4 No. Jurisdiction Regulators/ authorities Comments 2 Singapore Monetary Authority of Singapore (MAS) • The MAS released a consultation paper on proposed amendments to the Monetary Authority of Singapore Act on 26 December 2012 (the MAS Consultation Paper).17 The proposals adopt some of the recommendations made in the ‘Key Attributes of Effective Resolution Regimes for Financial Institutions’ document (the Key Attributes) published by the FSB in October 2011. It was noted in the MAS Consultation Paper that the ‘MAS is monitoring the global implementation of [the Key Attributes] before formulating changes to the resolution regime for financial institutions in Singapore.’ The MAS published a response to the feedback received on 5 February 2013.18 • Following the MAS Consultation Paper, the Monetary Authority of Singapore (Amendment) Bill 2013 and the Financial Institutions (Miscellaneous Amendments) Bill 2013 were passed on 15 March 2013, extending the existing resolution regime applicable to banks and insurers to a wider group of financial institutions and providing additional powers to the MAS.19 • The MAS has been involved in the Crisis Management Group (CMG) meetings of six global  systemically important banks (G-SIBs). The meetings facilitate information exchanges between home and host supervisors and the establishment of institution-specific cross-border cooperation agreements to support recovery and resolution planning.20 • In a 2013 International Monetary Fund (IMF) assessment, it was stated that ‘several systemically important banks [in Singapore], including the locally-incorporated banks and domestic branches of foreign banks, are in the process of developing recovery plans’ 21 and the ‘MAS has required several systemically important banks to submit their recovery plans. MAS has engaged the banks as part of an iterative process to formulate MAS’s rules on recovery and resolution planning... In addition, MAS is currently working towards a multilateral sharing arrangement amongst Executives Meeting of East Asia Pacific Central Banks’ Working Group on Banking Supervision members on resolution planning information, via a resolution planning survey to be completed and shared amongst the member countries. MAS will also be engaging host supervisors bilaterally on bank-specific resolution issues, such as the systemic importance and relevance of the Singapore operations in the host jurisdictions and their financial systems.’ 22 • On 25 June 2014, the MAS released a consultation paper proposing a D-SIB framework in Singapore. The paper outlines the assessment methodology for identifying D-SIBs and a range of policy measures applicable to them, including HLA requirements and recovery and resolution planning. The consultation period closed on 25 July 2014.23 The MAS published its response to feedback received from the public consultation on 30 April 2015.24 • On 30 April 2015, the MAS published its framework for identifying and supervising D-SIBs in Singapore and the inaugural list of seven D-SIBs.25 The MAS will apply additional supervisory measures on banks designated as D-SIBs. Banks that have a significant retail presence in Singapore will be required to locally incorporate their retail operations. Locally-incorporated D-SIBs will need to meet capital requirements higher than the Basel III minimum requirements. Other measures such as recovery and resolution planning, liquidity coverage ratio requirements, and enhanced disclosures will also apply, depending on the bank’s operating model and structure. The MAS will allow a transition period for affected banks to comply with the requirements that are currently not in effect, such as the local incorporation requirement. The D-SIB framework, including the methodology and indicators, will be reviewed periodically. • On 26 May 2015, the FSB, in its Thematic Review on Supervisory Frameworks and Approaches for SIBs, recognised that Singapore is making legislative changes to expand resolution powers. SIBs are required to establish a recovery planning process, and submit recovery plans and information relating to resolution planning. The FSB noted that work is in progress to implement the FSB’s Key Attributes, in particular, implementing statutory powers for bail-in and stays on termination rights, taking into account the local context.26 5 No. Jurisdiction Regulators/ authorities Comments • On 23 June 2015, the MAS released a Consultation Paper on Proposed Enhancements to Resolution Regime for Financial Institutions in Singapore. In the paper, the MAS proposes enhancements to the resolution regime in Singapore by strengthening its powers to resolve distressed institutions while maintaining continuity of their critical economic functions. The policy proposals cover: i. recovery and resolution planning; ii. temporary stays on early termination rights on financial contracts, ensuring continuity of essential services and functions; iii. temporary suspensions and stays on insurance contracts; iv. statutory bail-in powers; v. cross-border recognition of resolution actions; vi. creditor safeguards; and vii. resolution funding. • The submission deadline for comments on the proposals was 22 July 2015.27 The MAS published two related documents on 29 April 2016: (i) the MAS’s response to feedback received from the consultation28; and (ii) a Consultation Paper on the Proposed Legislative Amendments to Enhance the Resolution Regime for Financial Institutions in Singapore.29 The 29 April 2016 consultation paper seeks to amend the MAS Act in order to strengthen the MAS’s powers to resolve distressed financial institutions while maintaining continuity of their critical economic functions, as well as the Monetary Authority of Singapore (Control and Resolution of Financial Institutions) Regulations 2013 (MAS Regulations) in order to include safeguards to ensure that set-off and netting arrangements will not be affected by the exercise of resolution powers under the MAS Act. • The proposed amendments to the MAS Act: (i) consolidate the MAS’s powers to impose recovery and resolution planning requirements on pertinent financial institutions and insurers that have been notified by the MAS. Such pertinent financial institutions and insurers will have to prepare recovery plans, submit information to the MAS for resolution planning, and where necessary adopt measures to address deficiencies in their recovery plans and remove impediments to resolvability; (ii) empower the MAS to stay, for a maximum of two business days, the termination rights of counterparties to financial and non-financial contracts entered into with a pertinent financial institution or insurer over which the MAS has exercised its resolution powers; (iii) contain a statutory bail-in regime, which the MAS intends to be applicable only to Singapore-incorporated banks and bank holding companies for the time being; and (iv) provide for the recognition of cross-border resolution actions , a creditor-and-shareholder compensation framework, and a resolution funding framework. The amendments to the MAS Regulations on the other hand ensure that set-off and netting arrangements will not be affected by the exercise of resolution powers under the MAS Act, in particular where there is a transfer of part but not the whole of the business of a pertinent financial institution. • The MAS is also consulting on a draft notice and guidelines on recovery and resolution planning for banks. The proposed notice and guidelines elaborate on the development of a framework of trigger events and recovery options, as well as the information that local and foreign banks are required to maintain for resolution planning. The consultation has closed on 30 May 2016. • On 25 January 2016, the Banking (Amendment) Bill 2016 was moved for first reading in Singapore’s Parliament. The bill introduces two main measures to strengthen prudential safeguards. The bill provides the MAS with the power to require foreign banks to locally incorporate all or part of their banking business, if the MAS is of the opinion that it is necessary or expedient in the interest of the public, the banks’ depositors, or the financial system in Singapore. This requirement for local incorporation is one of the supervisory measures for D-SIBs that the MAS announced on 30 April 2015. The bill also empowers the MAS to set the banks’ leverage ratio and liquidity coverage ratio requirements, in line with international standards.30 The Banking (Amendment) Act 2016 was passed on 29 February 2016, and will come into force on a date to be notified in the Gazette.31 • In the FSB’s 18 August 2016 ‘Resilience through resolvability – moving from policy design to implementation; 5th Report to the G20 on progress in resolution’ (FSB’s 5th Report on Progress in Resolution) 32, it was reported that draft legislation was prepared and put in the public domain for consultation, for the introduction of specific powers to require recovery and resolution planning and explicit power to make changes to remove barriers and impediments to resolvability. 6 No. Jurisdiction Regulators/ authorities Comments 3 Australia Australian Prudential Regulation Authority (APRA); Reserve Bank of Australia (RBA) • In 2011, APRA implemented a pilot programme on recovery plans for certain larger authorised deposit-taking institutions (ADIs) in Australia. ADIs were required to prepare a comprehensive recovery plan setting out the specific actions they would take to restore themselves to a sound financial condition in the context of an assumed scenario involving a major depletion of capital and associated liquidity pressures. Draft recovery plans were required by the end of 2011 and finalised plans were required by mid-2012.33 • In a report published by APRA in 2012, it was noted that ‘APRA is extending the recovery planning exercise to medium-sized ADIs and is considering its extension to the larger general insurers and life insurers in 2013.’ 34 • In September 2012, the Australian government issued a consultation paper with proposals to enhance APRA’s resolution powers in relation to ADIs, superannuation entities and general and life insurers.35 The consultation concluded on 14 December 2012. APRA stated in its 2013 Annual Report that ‘No final position on [the] options [proposed in the consultation paper] has been reached.’ 36 • APRA published an information paper on 23 December 2013 on its framework for dealing with D-SIBs. The information paper provides details on the methodology APRA has used to identify D-SIBs in Australia and how the HLA capital requirement will apply. The D-SIB framework has come into effect on 1 January 2016, as per the Basel Committee on Banking Supervision (BCBS) timetable.37 • In the RBA’s 2013 Financial Stability Review and APRA’s 2013 Annual Report, it was noted that the Council of Financial Regulators (CFR, comprising RBA, APRA, the Australian Securities and Investments Commission and the Treasury) are currently working on further refinements to the resolution regimes for prudentially regulated entities and for FMIs (such as payment systems, central counterparties and securities settlement systems).38 The CFR has been developing legislative proposals that would strengthen recovery and resolution regimes for FMIs.39 • Australian licensed central counterparties will be required to develop and maintain comprehensive and effective recovery plans by 31 March 2014 as required under the new Financial Stability Standards set by the RBA in December 2012.40 • In December 2014, the APRA released the final prudential standard CPS 220 (CPS 220) and the corresponding prudential practice guide applicable to the financial services and banking industry.41 CPS 220 relates to APRA’s approach to implement standards across the industry to harmonise and enhance their risk management framework. In particular, an APRA-regulated institution must maintain a risk management strategy that addresses the process for establishing and maintaining appropriate contingency arrangements (including robust and credible recovery plans where warranted) for the operation of the risk management framework in stressed conditions.42 APRA regulated institutions are expected to comply with CPS 220 from 1 January 2015 onwards. As part of this release, the APRA has also released an amended Prudential Standard CPS 510 where governance standards related to risk management have been updated to align with those of CPS 220.43 • In APRA’s 2014 Annual Report, it was noted that ‘[a]long with members of the [CFR], APRA has continued its work on general resolution planning, with a focus on measures that would enable cost-effective resolution of a regulated institution in the event recovery is not feasible. This work has primarily involved exploring resolution options for a distressed ADI, and funding issues related to the Financial Claims Scheme (FCS), including options for prefunding, and refinement of ADI crisis resolution coordination.’ 44 • On 20 February 2015, the Australian government launched a consultation process on proposals for a special resolution regime for FMIs.45 The proposed regime would cover domestic clearing and settlement facilities, with the RBA as the resolution authority; and domestic trade repositories that are identified as systemically important, with the Australian Securities and Investment Commission as the resolution authority. The scope and structure of the proposed regime and the powers envisaged are consistent with the Key Attributes. The consultation closed on 27 March 2015. The consultation paper on FMI resolution is part of broader ongoing work to strengthen domestic resolution and crisis management arrangements. 7 No. Jurisdiction Regulators/ authorities Comments • On 24 June 2015, the RBA and the Bank of England signed a memorandum of understanding to facilitate rapid information exchange and co-operation and liaison, to address information sharing in Emergency Situations as well as in day-to-day supervision of ‘Regulated Entities’, which includes central counterparties and securities settlement facilities in the UK and Australia. The RBA and the Bank of England will periodically review whether any Regulated Entities merit specific discussion of contingency planning and crisis management preparations. Each authority will endeavour to inform the other authority of regulatory changes relating to resolution measures, which will or may have a material impact on the operations or activities of a Regulated Entity in the other authority’s jurisdiction.46 • On 28 August 2015, APRA published its 2015-2019 Corporate Plan outlining its priorities, which are encapsulated in six strategic objectives.47 These include a strategic objective on “Failure and Crisis Preparedness” under which the strategies include enhancing supervision, maintaining a robust prudential framework and materially strengthening its failure and crisis preparedness. • In its 2015 Annual Report, APRA noted that during 2015 “APRA continued its work on resolution planning along with the members of the CFR. The work primarily involved exploring resolution options for a distressed ADI, including identifying areas where enhancements to APRA’s crisis management powers may be required. APRA has also continued to work closely with New Zealand agencies on trans-Tasman crisis management arrangements, under the auspices of the Trans-Tasman Council on Banking Supervision. APRA also undertook both internal (for different APRA-regulated industries) and cross-agency (for ADIs) simulation exercises to test its capacity to respond to crisis scenarios.” APRA also noted that “the strengthening of APRA’s preparedness for financial failures in institutions has been identified as a strategic priority for 2015/2016.” 48 • On 20 October 2015, the government issued its response to the Financial System Inquiry in which the government agreed that regulatory settings should provide regulators with clear powers in the event a prudentially regulated financial entity or FMI fails and stated that they will consult on measures to clarify and strengthen regulatory powers by mid-2016.49 • In November 2015, the conclusions to the consultation for a special resolution regime for FMIs were issued.50 The CFR is advising the government on the development of draft legislation that reflects the proposals set out in the consultation paper and the response to consultation. The draft legislation will incorporate changes to the Corporations Act to implement the proposed new approach to assessing whether an overseas clearing and settlement facility must be either licensed or exempted, while the development of the draft legislation is expected to proceed alongside legislative changes to enhance the APRA’s crisis management powers. Stakeholders will have the opportunity to comment on the draft legislation in due course. According to the ASX’s 2016 Annual Report (published on 18 August 2016), the CFR has indicated that the draft legislation is expected in FY17, subject to Parliament’s legislative programme.51 • The Financial Stability Review published by the RBA in April 201652 noted that “work is underway to prepare legislative reforms that will include updated proposals to strengthen APRA’s crisis management powers, as well as introduce a resolution regime for FMIs that aligns with the Key Attributes. The update to APRA’s crisis management powers builds on proposals consulted on in 2012 and covers all APRA-regulated entities. It will broaden APRA’s powers to respond to the distress or failure of a financial group or foreign bank branch, give binding directions and appoint a statutory or judicial manager. The resolution regime for FMIs will reflect the CFR's November 2015 response to generally supportive feedback from a consultation last year. The planned regime would extend to all domestically incorporated and licensed clearing and settlement facilities, as well as trade repositories that are incorporated and licensed in Australia. It will also empower the Australian authorities to act to support overseas authorities resolving FMIs that are licensed to operate in Australia. In addition, the CFR sees a case for considering whether the scope of powers should be extended to address the situation in which offshore resolution authorities acted, or failed to act, in a way that adversely affected Australian interests. Under the planned regime the RBA would be the resolution authority for clearing and settlement facilities, with an overarching objective to maintain overall stability in the financial system and an additional key objective to maintain the continuity of critical FMI services.” • The FSB’s 5th Report on Progress in Resolution indicates that there has been a policy development pre-consultation for the development of a formal framework for recovery and resolution planning and power to require changes to improve resolvability. 8 No. Jurisdiction Regulators/ authorities Comments 4 Japan Financial Services Agency (FSA); Deposit Insurance Corporation of Japan (DICJ) • According to the FSA, all of the three banks designated as G-SIFIs in Japan (Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Mizuho) and Nomura prepared their RRPs by the end of 2012 in discussion with the FSA. However those RRPs have not been published and according to the FSA will not be published. • On 25 January 2013, the Working Group on Framework of Regulations on Banks which Contribute to Stability of the Financial System, etc submitted a report to the FSA, which proposes further regulations on banks including a new framework for the ordinary resolution of banks.53 • Following public comments procedures, the FSA published new guidelines on 7 February 2013 for the supervision of major banks54 and financial instruments trading business providers55, which set out the basic rules on RRPs to be prepared by banks in Japan. Under the guidelines: — a financial institution designated as a G-SIFI or determined to be systemically important must prepare and submit a RRP to the FSA; — the RRP must include: (i) a summary of the recovery plan; (ii) assumptions for the preparation of the recovery plan; (iii) events which trigger the recovery plan; (iv) a summary of subsidiaries, overseas operations and business units; (v) analysis of recovery options; and (vi) the information necessary to prepare a recovery plan, the process for deciding on recovery options and the time to collect such information; and — the RRP will be reviewed annually and when any significant change is made to the relevant financial institution’s business or group structure. • In March 2014, the amended Deposit Insurance Act came into force. The revised Act aims to enhance the resolution framework of financial institutions. The revisions allow the prime minister to determine whether there is a need to implement any orderly resolution mechanism of financial institutions, following deliberations of the Financial Crisis Response Council. Where necessary to prevent severe market turmoil, the DICJ may provide liquidity and financial support to financial institutions, including by way of capital injection.56 • According to the FSA’s annual monitoring policies for financial institutions published in 201357 and 201458, it was noted that the FSA will request G-SIBs and encourage internationally active securities company groups with large and complex operations to develop recovery plans. At the same time, the FSA will continue its efforts in developing resolution plans for these firms. In general, the FSA will continue to promote the enhancement of group risk management for both times of crisis and normal situations. • According to the FSA’s annual monitoring policies for financial institutions published in 201357 and 201458, it was noted that the FSA will request G-SIBs and encourage internationally active securities company groups with large and complex operations to develop recovery plans. At the same time, the FSA will continue its efforts in developing resolution plans for these firms. In general, the FSA will continue to promote the enhancement of group risk management for both times of crisis and normal situations. • On 1 April 2015, the DICJ issued the Deposit Insurance Corporation of Japan Operational Policy (April 2015 – March 2016), which describes, among other things, how the DICJ will improve its preparedness for failure resolution of financial institutions and how the DICJ will implement the management and disposal of assets acquired from failed financial institutions. This policy also provides that the DICJ, having been provided with an important role in executing measures to deal with market-based financial crises as a result of the enforcement of the revised Deposit Insurance Act in March 2014, will cooperate with relevant authorities and develop its preparedness and response capability in respect of the resolution of financial institutions.59 • On 26 May 2015, the FSB published the Thematic Review on Supervisory Frameworks and Approaches for SIBs. The paper notes the following challenges and gaps for Japan: (i) in relation to recovery plans, responding to issues identified with host supervisors at CMGs; and (ii) in relation to resolution plans, evaluating the feasibility and reliability with host supervisors through the ‘Resolvability Assessment Process’.60 9 No. Jurisdiction Regulators/ authorities Comments • In the FSB’s 5th Report on Progress in Resolution it is reported that in April 2016, the FSA published its Approach to Introduce the TLAC Standard. Based on this approach document, the FSA will set requirements at the level of the Minimum TLAC requirement in the TLAC Term Sheet. The 16% risk-weighted assets requirement will apply from 31 March 2019 and the 18% risk-weighted assets requirement from 31 March 2022, in line with the Japanese financial year and mirroring the implementation of Basel III. The Japanese G-SIBs will be required to issue external TLAC from the top-tier bank holding companies. The FSA’s approach document also outlines the preferred single point of entry resolution strategy for an orderly resolution of Japanese G-SIBs. • On 22 June 2016, the FSA published draft amendments to the comprehensive guidelines for banks, insurance companies and financial instruments business operators. Under the proposed amendments, when a financial institution enters into a derivative, repo, securities lending or similar transaction governed by foreign law, it must ensure that the government's stay order issued pursuant to the Deposit Insurance Act to prevent derivatives and certain other transactions from being terminated would be effective. As an example, the financial institution can do so by: (i) adopting with the counterparty an international protocol designed to ensure that the government’s stay order would apply to foreign law governed contracts; or (b) specifying in the relevant agreement that the government’s stay order applies to such transaction. • The FSB’s 5th Report on Progress in Resolution described the status of implementation of the Key Attributes, based on self-reporting by national authorities. Japanese authorities reported that the following Key Attributes had been implemented: i. powers to transfer or sell assets and liabilities; ii. powers to establish a temporary bridge institution; iii. powers to impose temporary stay on early termination rights; iv. resolution powers in relation to holding companies; v. recovery planning for systemic firms; vi. resolution planning for systemic firms; and vii. powers to require changes to firms’ structure and operations to improve resolvability. • Regarding powers to write down and convert liabilities (bail-in), Japanese authorities reported that they were able to achieve the economic objectives of bail-in by capitalising a bridge institution to which functions have been transferred and by liquidating the residual firm via powers to separate assets and liabilities of a failed institution. However, it is not clear that the resolution regime provides for powers to convert claims of creditors of the failed institution into equity of that institution or of any successor in resolution. 5 Korea Bank of Korea (BOK); Financial Services Commission (FSC); Financial Supervisory Service (FSS); Korean Deposit Insurance Corporation (KDIC) • In the 2012 FSB survey on the progress of the implementation of G20/FSB recommendations in Korea and again in the 2013 FSB survey on the progress of the implementation of G20/FSB recommendations in Korea, it was noted that: ‘[The] FSC will conduct an in-depth study on the feasibility of adopting new supervisory regulation on domestic SIFIs. Meanwhile Korea will contribute to setting up new standards by actively participating in FSB discussions.’ 61 • In January 2015, the IMF published a technical note on Republic of Korea in relation to its crisis preparedness and crisis management framework.62 While the resolution framework for financial institutions in Korea is seen as comprehensive, the report identifies several areas that need improvement, which include (i) clarifying the definition of ‘systemic stability’; (ii) improving the resolvability of financial institutions through mechanisms such as living wills and bail-ins; (iii) establishing criteria for the identification of systemically important financial institutions; and (iv) introducing schemes to improve the ‘resolvability’ of financial institutions, improving efficiency, and reducing costs. Korea has set up a special resolution regime for distressed financial institutions in Korea, covering banks, investment traders, brokers, collective investment business entities, investment advisory business entities, discretionary investment business entities, insurance companies, mutual saving banks, trust business entities, merchant banks and financial holding companies. The FSC and FSS have entered into memoranda of understanding with 33 foreign authorities in 18 countries, covering information exchange arrangements for ongoing supervisory purposes during normal times and on request. However the memoranda of understanding do not explicitly provide for arrangements relating to crisis preparedness and crisis management including resolution matters. 10 No. Jurisdiction Regulators/ authorities Comments • In June 2015, the FSS announced that it will implement D-SIB regulation starting in January 2016 in line with BCBS proposals and designate D-SIBs later in the year. To identify the first group of D-SIBs, five banks, eight bank holding companies and 21 foreign bank branches were assessed, commencing in 2015.63 • On 29 October 2015, the FSC announced that regulatory regimes for D-SIBs and capital buffers will be implemented from 2016 and gradually strengthened over time and that detailed plans will be set out to adopt recovery and resolution plans from the end of 2017.64 • On 30 October 2015, the FSC announced that it has determined the basic direction for improving the recovery and resolution regimes, particularly introducing an RRP framework and bail-in scheme, and providing the FSC with the power to impose temporary stays on contractual early termination rights. The FSC stated that the Act on Structural Improvement of the Financial Industry will be amended in 2016 after receiving comments from stakeholders and monitoring the developments in other countries that have not yet adopted the regimes (e.g., Japan and Australia). The FSC also stated that the implementation of the FSB’s recommendations for recovery and resolution regimes will be reviewed in 2018.65 • On 16 December 2015, the FSC approved amendments to the Regulation on Supervision of Banking Business and the Supervisory Regulation on Financial Holding Companies. The proposed amendments, which came into effect on 1 January 2016, are intended to facilitate the FSC’s designation of D-SIBs and the imposition of countercyclical capital buffers. The D-SIBs are to be designated on the basis of the banks’ systemic importance to the financial system. Institutions identified as D-SIBs would be subject to additional capital requirements.66 • On 30 December 2015, the FSC announced that it has identified four bank holding companies and one bank as D-SIBs for 2016. The FSC will identify D-SIBs annually in accordance with the assessment criteria proposed by the BCBS. Those identified as D-SIBs are to be required to set aside an additional capital of 1% if deemed necessary, by 0.25% per year in the next four years from 2016 to 2019.67 • On 18 March 2016, the FSB noted in its Second Thematic Review that the Korean resolution authorities are yet to be empowered to: (i) require continued provision of critical shared services; (ii) write down and convert liabilities of a failed institution; or (iii) impose temporary stay on the exercise of early termination rights.68 • The FSB’s 5th Report on Progress in Resolution indicates that reform or policy proposals for the introduction of a recovery and resolution regime including resolution plans and resolvability assessments were published. 6 Malaysia Bank Negara Malaysia (BNM) Malaysia Deposit Insurance Corporation (PIDM) • In a 2013 report prepared by the International Monetary Fund on Malaysia, it was noted that the BNM ‘has a broad range of powers to avert or reduce risks to financial stability. These include intervention and resolution measures, with powers to reduce systemic risks emanating from both regulated and non-regulated entities and to stem institutional or market liquidity shocks’. Further, it was noted that the BNM ‘will soon be looking to address recovery and resolution planning.’ 69 • In June 2013, the Financial Services Act 2013 and the Islamic Financial Services Act 2013 came into force. The above enactments supplement the Central Bank of Malaysia Act 2009 in requiring enhanced risk-management, including requiring financial institutions to establish effective internal controls, compliance and risk management systems which match with the nature, scale and complexity of the business of each financial institution. • On 19 March 2014 in the BNM’s Governor’s statement70, it was stated that: ‘[A]mong the key regulatory and supervisory priorities for the Bank in the year ahead is the implementation of new arrangements for the prudential oversight of financial groups, and continuing to raise the bar on...risk management practices in the financial services industry. [BNM] will also commence work on the development of a framework for identifying and strengthening the regulatory and supervisory regime for financial institutions that are systemically significant to the domestic financial system. This will include requirements for such institutions to maintain strong financial buffers, develop credible recovery plans to restore financial viability in the event of severe stress, and including support strategies by the relevant authorities to achieve an orderly resolution where necessary.’ 71 11 No. Jurisdiction Regulators/ authorities Comments • On 15 September 2015, the BNM’s Assistant Governor made a speech in which she stated that: ‘Within the financial sector, a key focus of reforms since the global financial crisis has been on the development of recovery plans which aim to protect the continuity of critical functions and core business lines in a situation of financial stress. Work has also been initiated to implement this in Malaysia. Financial institutions are expected to develop a menu of options for recovering from events of severe stress in order to restore business to a stable condition. These plans must be regularly updated to reflect changes in a firm’s business model and operational arrangements.’ 72 • On 16 December 2015, the PIDM announced that the PIDM (Amendment) Bill 2015, which seeks to enhance the PIDM’s resolution powers, and align certain provisions with the Financial Services Act 2013 and the Islamic Financial Services Act 2013, has been approved by Malaysia’s House of Representatives (Dewan Rakyat). The bill proposes that the PIDM be empowered to compel the sale of shares by shareholders of a non-viable member institution to a willing private sector buyer in certain circumstances, subject to the Minister of Finance’s approval.73 The PIDM (Amendment) Act was gazetted on 7 March 2016 and took effect on 8 March 2016.74 • The PIDM’s Corporate Plan 2016 – 2018 outlines its key initiatives for the three-year period, including: (i) developing a resolution planning framework; and (ii) working with other authorities to determine the scope of PIDM’s role and related policy and legislative issues in relation to the national resolution of financial institutions that are not member institutions of PIDM. The PIDM notes that it will be guided by the FSB’s Key Attributes but will ensure that the resolution regime is applicable to Malaysia.75 • On 29 February 2016, the chief executive officer of the PIDM said that a key initiative in 2016 is the research and development of a resolution plan framework so that a member institution can be resolved in an orderly manner, without severe systemic disruption and without exposing taxpayers to loss, while protecting vital economic functions.76 • In the PIDM 2015 Annual Report,77 it was said that the PIDM would develop a resolution plan framework in respect of systemically important financial institutions, complete the development of the evaluation model that supports the assessment of resolution options, continue to conduct simulations for intervention and failure resolution readiness, and complete the target funds (which are established to cover the expected net losses arising from any intervention and resolution activity) for life and takaful funds. • On 26 May 2016, the BNM Governor said in a speech that “the BNM is progressing work in coordination with the PIDM to develop an effective resolution and recovery framework. Banks are expected to continuously assess and identify critical functions from a systemic perspective within their operations, and prepare contingency and recovery plans to preserve those functions under a stress scenario. The BNM will engage the banking industry to share more information on this initiative, including our implementation approach. A concept paper on this will also be issued for comments”.78 To date, no such concept paper has been released publicly. However, under the enhanced corporate governance standards issued by the BNM on 3 August 2016, the board of a financial institution is required to oversee and approve the recovery and resolution as well as business continuity plans for the financial institution to restore its financial strength, and maintain or preserve critical operations and services when it comes under stress.79 7 China China Banking Regulatory Commission (CBRC); People’s Bank of China (PBC) • In the 2012 FSB survey on the progress of the implementation of G20/FSB recommendations in China, it was noted that: ‘[The] PBC is drafting identification standard and assessment framework for [domestic systemically important financial institutions (D-SIFIs)] with relevant sectors, which will incorporate quantitative indicator-based approach and qualitative judgment to identify D-SIFIs, as well as proposing regulatory requirement, formulating recovery and resolution plan.’ 80 ‘[A] methodology for assessing systemic importance and supervisory guidelines for commercial banks will soon be published for public consultation.’ 81 12 No. Jurisdiction Regulators/ authorities Comments • In the 2013 FSB survey on the progress of the implementation of G20/FSB recommendations in China, it was noted that: ‘Efforts was made to build a risk resolution and liquidation arrangements for SIFIs in China. The laws, rules and guidance under which CBRC operates generally form a benchmark of prudential standards that is of high quality and was drawn extensively from international standards and the [Basel Core Principles] themselves. The CBRC exercises consolidated supervision of the global activities of banking groups during the processes of licensing and ongoing supervision, and by making arrangements for cross border and cross sector supervisory co-operation. During the process, the CBRC monitors and assesses all significant aspects of banking groups’ operations and applies prudential requirements to ensure their safety and soundness. As the consolidated supervisor of banking groups, the CBRC keeps itself informed of the overall structure of each banking group and maintains adequate understanding of each group’s activities, both domestic and cross-border.’ 82 ‘China will enhance supervision on SIFIs, setting higher regulatory requirements, conducting SIFI resolvability assessment, strengthening risk resolution and liquidation arrangements to make sure that SIFIs could be orderly resolved.’ 83 ‘Currently, the SIFI assessment methodology in China is under development. The PBC set up crisis management and risk resolution framework.’ 84 • In the PBC’s Financial Stability Report 2013, the PBC stated ‘[a]ssessment methodologies, supervisory rules and effective resolution regimes that specifically target D-SIFIs are expected to be finalised, and SIFIs will be guided to develop RRPs and carry out resolvability assessments accordingly.’ The PBC also stated further efforts need to be taken to establish a specific resolution authority and to establish the crisis management groups for all the SIFIs.85 • On 6 January 2014, the CBRC issued a set of guidelines requiring commercial banks which have been designated as G-SIBs or whose assets as of 2013 year-end exceeded RMB1.6 trillion to publish information based on the 12 indicators used by the BCBS in identifying G-SIBs. The banks are required to release such information on their websites or in their annual reports within four months of their accounting year-end, and in any case not later than 31 July of each year.86 • In the PBC’s Financial Stability Report 2014, it was noted that: — the PBC and CBRC have been actively involved in the banking supervision regulatory reforms led by the FSB and BCBS, and have made great efforts to implement the relevant international standards in China; — in accordance with the FSB’s recommendations, Bank of China’s CMG was established to commence its recovery and resolution planning. A number of the overseas branches of certain Chinese banks have also submitted resolution plans to the respective overseas regulators; and — Industrial and Commercial Bank of China was designated by the FSB as another G-SIB in China.87 • On 8 April 2014, the CBRC issued a guidance opinion specifying various risk management measures to be implemented by trust companies. Under the opinion, trust companies are required to prepare and submit their RRPs by 30 June 2014. The opinion also stipulates certain arrangements that RRPs should provide for in the event of distress, including deferral of incentive remuneration, restriction on and refund of dividends, business segregation and recovery, as well as institution resolution planning. Each CBRC local branch is also required to submit a proposed supervision plan for such resolution regime along with the RRPs of the trust companies in its jurisdiction to the CBRC by 20 July 2014.88 • In the PBC’s Financial Stability Report 2015,89 the PBC stated that the Industrial and Commercial Bank of China, Bank of China and Agricultural Bank of China have been designated by the FSB as G-SIBs and will therefore be subject to additional capital requirements. The PBC reported that China has also set up a G-SIB CMG pursuant to the FSB’s request and is responsible for setting up RRP with the aim of strengthening the infrastructure of China’s financial institutions. The report also stated that China will actively participate in FSB policy discussions on TLAC in order to secure a more level playing field for Chinese G-SIBs. 13 No. Jurisdiction Regulators/ authorities Comments • According to a press release issued on 28 September 2015, the CBRC, as part of China’s (Belt and Road) initiative, has signed memoranda of understanding or letters of exchanges with the CBRC with 27 countries under which the relevant supervisory authorities agree to strengthen cooperation with the CBRC. The CBRC stated in the press release that its next step will be to accelerate the process of signing memoranda of understanding with countries that have not yet established official cooperation mechanisms, focusing on, among other things, establishing effective cooperation and improving crisis resolution mechanisms.90 • On 3 November 2015, the FSB published an updated list of G-SIBs in which China Construction Bank was designated as a G-SIB.91 • In a press release dated 16 April 201692, the PBC quoted the communique of G20 Finance Ministers and Central Bank Governors Meeting (14–15 April 2016, Washington D.C.). In particular, paragraph 6 of the communique reads “[G20] reiterate our commitment to expediting implementation of the Principles for Financial Market Infrastructures, and to progressing on the work to enhance central counterparty resilience, recovery planning and resolvability, including on cross-border cooperation arrangements such as Crisis Management Groups, and look forward to the report by the FSB in September [2016].” • In the PBC’s Financial Stability Report 2016,93 the PBC confirmed that the China Construction Bank was added to the list of G-SIBs for the first time, and was allocated in Bucket 1 together with Bank of China, Industrial and Commercial Bank of China and Agriculture Bank of China. In addition, the PBC stated in the report that CMGs of Bank of China and Industrial and Commercial Bank of China have approved their annually renewed RRPs. Bank of China and Industrial and Commercial Bank of China have completed the first round of resolvability assessment process and submitted the results to the FSB. CMG of ABC has been established. The annually updated RRP of Ping An Insurance (Group) Company of China has been approved by its CMG. • The FSB’s 5th Report on Progress in Resolution indicates that draft rules have been submitted for the introduction of resolution planning requirements, resolvability assessments, and measures to allow authorities to require changes to improve resolvability. The FSB’s 5th Report on Progress in Resolution reports further that implementation rules are being drafted to introduce “additional resolution powers, including bridge bank”. 8 New Zealand Reserve Bank of New Zealand (RBNZ) • The RBNZ has moved to ensure that all systemically important banks have in place the systems required to make Open Bank Resolution operational if it were ever needed.94 In September 2013, the RBNZ issued a policy regarding Open Bank Resolution prepositioning requirements.95 • In March 2013, the RBNZ issued a consultation document on strengthening the legislative framework for the oversight of payment systems and other financial market infrastructures.96 The main proposals include the establishment of a recognition regime for systemically important systems, and explicit powers for the RBNZ to oversee such systems effectively. The RBNZ released its responses to the consultation submissions in October 201397 and, on 30 September 2014, further published its proposed amendments to the relevant policy documents for consultation. In particular, the RBNZ proposed a risk-based oversight approach, with a main focus on systemically important infrastructures which have the largest risks. The deadline for submissions in response to the consultation was 28 November 2014. • In March 2015, following consultation, the RBNZ published a policy statement on its oversight of FMIs to reflect the recently updated Principles for Financial Market Infrastructures which all systemically important FMIs are required to comply with where relevant.98 The RBNZ and the Financial Markets Authority, as joint regulators of designated systems, also updated their policy statement on the designation and oversight of designated settlement systems in March 2015.99 • In the financial stability report issued by the RBNZ in May 2014, the RBNZ announced that it will be undertaking a stocktake of regulations for banks and non-bank deposit takers to ‘look for ways in which the existing regulatory requirements can achieve their intended effects more efficiently...applied more consistently, or can be made clearer’. This stocktake will include review of the open bank resolution pre-positioning requirements policy.100 In the financial stability report issued by the RBNZ in May 2015, the RBNZ noted that good progress has been made on the stocktake, with public consultation on specific proposals expected to commence in the second half of 2015.101 14 No. Jurisdiction Regulators/ authorities Comments • On 21 July 2015, the RBNZ issued a consultation document on potential changes to the prudential regime for banks arising out of the regulatory stocktake.102 The main proposals include potential changes to the frequency and content of disclosure statements, changes in the format and structure of the Banking Supervision Handbook and measures to further strengthen the RBNZ’s policy development process and interactions with stakeholders. The consultation response deadline was 16 September 2015. • In April 2015, the RBNZ issued a second consultation document on the oversight of designated FMIs.103 The consultation invites public opinion on proposed changes to the existing designation regime to improve the oversight of systemically important FMIs and in particular, to provide the RBNZ and the Financial Markets Authority with powers to effectively manage crises involving such entities. The consultation response deadline was 3 July 2015. • On 18 December 2015, the RBNZ published the conclusions of its regulatory stocktake. The RBNZ stated that the consultation found broad support for most of the RBNZ’s specific proposals, such as improving the drafting and layout of the documents that set out prudential requirements for banks. There was also broad support for a number of technical changes that were proposed in specific prudential requirements. RBNZ stated that it also received useful feedback on several matters in respect of prudential requirements for non-bank deposit takers and will carry out further work based on its feedback.104 • In December 2015, the RBNZ released the conclusions for the second consultation document on the oversight of designated FMIs. The consultation conclusions set out an updated list of FMIs that are potentially of systemic importance. The RBNZ will undertake a limited scope consultation on the detailed design of the crisis management framework for designated FMIs in early 2016 with a ten-week consultation period. Subject to the approval by the Minister of Finance, these proposals will be presented to the Cabinet and will form the basis of concrete legislative proposals. The RBNZ plans to re-engage the industry via an exposure draft of the proposed legislation around the third quarter of 2016.105 • On 24 March 2016, the RBNZ published the third consultation document on an oversight regime for designated FMIs, in relation to crisis management powers for systemically important FMIs (the March Consultation).106 The proposals in the March Consultation Paper form the final part of the proposals to enhance oversight of FMIs, and are comprised of two parts: (i) systemically important FMIs to have in place business continuity plans (to achieve rapid recovery and timely resumption of essential services) and recovery and orderly wind-down plans (to respond to financial threats to the continued provision of essential services); and (ii) the RBNZ and the New Zealand Financial Markets Authority to be empowered to issue directions to the operators of systemically important FMIs, to appoint and remove directors of an operator, and to recommend that a systemically important FMI be placed into statutory management. In August 2016, the RBNZ published the summary of submissions and final policy proposals on the March Consultation Paper,107 where the RBNZ affirmed the two-tier approach. The RBNZ plans to consult the public on the draft legislation at the end of 2016 or in early 2017. • On 11 May 2016, the RBNZ published its Financial Stability Report where the RBNZ announced that it would soon issue a second consultation paper on outsourcing policy for registered banks. The aim of the policy is to ensure that a bank is able to continue to provide basic banking services in the event of failure of the bank, a service provider, or the overseas parent of the bank. The RBNZ also noted that the IMF will be undertaking a review of New Zealand’s financial system in August and November 2016, which would include an evaluation of the RBNZ’s crisis management and resolution framework.108 • On 23 May 2016, the RBNZ published the second consultation paper on the outsourcing policy for registered banks.109 The consultation supports banks’ continued use of outsourcing arrangements and proposes to: (i) require banks to have a robust back-up arrangement on key functions they want to outsource, and (ii) retain the existing threshold for the outsourcing policy. 15 No. Jurisdiction Regulators/ authorities Comments 9 India Reserve Bank of India (RBI); Securities and Exchange Board of India (SEBI); Financial Stability and Development Council (FSDC) • According to a monetary policy statement issued on 30 October 2012, an inter-agency working group has been established for the purpose of devising a comprehensive resolution regime for all types of financial institutions in India.110 • The RBI reported in December 2012 that the working group was still examining issues around the bank resolution framework.111 • In June 2013, the RBI reported that ‘the work on implementation of reforms on resolution regime has started with an examination of existing legislative arrangements for resolution of various types of financial sector entities.’ 112 • On 2 May 2014, a working group established by the Sub-Committee of FSDC published the ‘Report of the Working Group on Resolution Regime for Financial Institutions’113 for consultation.114 Among other things, the report: — stressed the need for a separate comprehensive legal framework with the required powers and tools to resolve all financial institutions irrespective of ownership; — proposed setting up a single regulatory authority (the Financial Resolution Authority (FRA)) which will be institutionally independent of regulators and the government in overseeing related matters; and — recommended the introduction of an early intervention mechanism where prompt corrective action could be introduced at early stages and matters to be handed over to the FRA in order to deal with events at latter stages of resolution. The deadline for comments was 31 May 2014. • On 22 July 2014, the RBI released the ‘Framework for Dealing with Domestic Systemically Important Banks’, which sets out the methodology for identifying D-SIBs and the additional regulatory and supervisory policies applicable to them. The list of D-SIBs will be published in August every year starting from 2015. Although there is no mention of the requirement of RRP in the document, the RBI acknowledged the regulatory measures proposed in the FSB’s October 2010 document entitled ‘Reducing the moral hazard posed by systemically important financial institutions’ and noted that it will consider implementing such measures for D-SIBs.115 • On 26 May 2015, the FSB, in its Thematic Review on Supervisory Frameworks and Approaches for SIBs, noted as a comment on ‘Challenges and gaps’ for RRP only that India’s RRP is a “work in progress”.116 • On 31 August 2015, the RBI published the inaugural list of D-SIBs. The RBI designated the State Bank of India and ICICI Bank Ltd. as D-SIBs.117 They will therefore be required to maintain additional Common Equity Tier 1. • As of 2 December 2015, the RBI has entered into memoranda of understanding with supervisors of 33 countries to promote greater supervisory cooperation and information exchange.118 • The Financial Stability Report issued by the RBI in December 2015 stated that the Clearing Corporation of India Limited has been advised to prepare, in consultation with the RBI, a recovery and resolution plan.119 • In a Financial Stability Report published on 28 June 2016,120 the RBI announced that steps have been taken towards achieving a resolution mechanism for financial entities, in line with FSB guidelines. A working group on a resolution regime for financial institutions, which submitted its report in May 2014, recommended the setting up of a Financial Resolution Agency. The Government also set up a task force in September 2014 to support the establishment of a Resolution Corporation. Further, a comprehensive Code on the Resolution of Financial Firms has been proposed to provide a specialised resolution mechanism to deal with bankruptcy situations in banks, insurance companies and other financial sector entities, and a draft of the Code is being prepared. • The FSB’s 5th Report on Progress in Resolution indicates that legislation is under development for the introduction of resolution planning and resolvability assessments. The FSB’s 5th Report on Progress in Resolution reports further that a ‘Code on Resolution of Financial Firms’ (which covers banks) will be introduced in the Parliament this Financial Year 2016–17 (April–March). 16 No. Jurisdiction Regulators/ authorities Comments • A Committee to draft a Code on Resolution of Financial Firms (Committee) was set up by the Government to prepare a report and the draft Code. The report was published on 21 September 2016121 and a draft Financial Resolution and Deposit Insurance Bill, 2016 (FRDI Bill) was published on 27 September 2016.122 The deadline for submission of comments is 14 October 2016. The note on summary of the recommendations of the Committee123 stated that: ‘The draft [FRDI] Bill consolidates the existing laws relating to resolution of certain categories of financial institutions…, including banks, insurance companies, financial market infrastructures, payment systems, and other financial service providers… which are presently scattered in a number of legislations, into a single legislation, and provides for additional tools of resolution, to enable the new authority (“Resolution Corporation”) to maintain the systemic stability in the country.’ The major recommendations of the Committee are as follows: — a Resolution Corporation to be set up under the FRDI Bill; — the Resolution Corporation shall have three types of funds: (i) the Corporation Insurance Fund for payment of deposit insurance; (ii) the Corporation Resolution Fund for covering resolution fees; and (iii) a Corporation General Fund for meeting the administrative expenses of the Resolution Corporation; — the Government, in consultation with the appropriate sectoral regulator, may designate certain categories of financial institutions as SIFIs, and the FRDI Bill envisages some additional powers that may be applied to these SIFIs; — after enactment of the FRDI Bill, the Deposit Insurance and Credit Guarantee Corporation shall be dissolved and all its functions will be carried out by the Resolution Corporation, which will become the authority responsible for providing deposit insurance in India; — the Resolution Corporation, in consultation with the appropriate regulator, will specify objective criteria for the classification of certain financial institutions into five categories: low, moderate, material, imminent, and critical, taking into account features of the institutions such as capital adequacy, asset quality, leverage ratio, liquidity and management capability; — financial institutions shall be required to prepare and submit a restoration plan and a resolution plan to the sectoral regulator and the Resolution Corporation, and these plans are required to be periodically updated; — the Resolution Corporation shall have the power to temporarily stay the operation of any early termination rights in respect of contracts, when such rights are triggered solely by a financial institution entering into resolution; — resolution tools available to the Resolution Corporation would include: (i) transferring the whole or part of the assets and liabilities of the financial institution to another person; (ii) creating a bridge financial institution; (iii) bail-in; (iv) merger or amalgamation of the financial institution; (v) acquisition of the financial institution; (vi) liquidation; and (vii) run-off in case of an insurance company, if deemed appropriate by the Resolution Corporation. A resolution must be completed within two years, with a potential extension of one year (except for liquidation); — if the position of a financial institution deteriorates to reach a stage of imminent risk to viability, the Resolution Corporation will act as receiver; — where the Resolution Corporation determines that liquidation is the most appropriate resolution tool, it shall apply to the National Company Law Tribunal for a liquidation order; and — the Central Government and the Resolution Corporation, with prior approval from the Central Government, can enter into memorandums of understanding with foreign governments and regulators and exchange information with them to give full effect to provisions of the FRDI Bill. 17 No. Jurisdiction Regulators/ authorities Comments 10 Indonesia Bank Indonesia (BI); Indonesia Deposit Insurance Corporation (LPS); Indonesia Financial Services Agency (OJK) • In the 2011 FSB survey on the progress of the implementation of G20/FSB recommendations in Indonesia, it was noted that: ‘Indonesia is not [a] member of CMG. However, formal supervisory co-operation and information sharing arrangements have been exercised with jurisdictions whose banks have significant presence in Indonesia.’ 124 • In the 2012 FSB survey on the progress of the implementation of G20/FSB recommendations in Indonesia, it was noted that: ‘Since April 2011, Bank Indonesia has enforced an enhanced supervisory framework (BI regulation number 12/3/PBI/2011). This enhanced framework is aimed at safeguarding financial system stability by enhancing consolidated supervision, taking prompt corrective actions, and resolving failing banks in effective manner. In addition, an enhanced framework also covers intensified supervisory approaches, especially to large banks as well as those deemed to having financial troubles.’ 125 • A draft Financial System Safety Net (FSSN) law had been under discussion by the Indonesian Government in the last decade.126 According to the FSB Thematic Review on Resolution Regimes, Peer Review Report, April 2013, the draft FSSN law clarifies ‘the powers and responsibilities of each resolution authority and the co-ordination responsibilities and decision making powers of the Financial System Stability Forum has been introduced.’ The draft legislation also provides ‘a more comprehensive resolution framework, including participation from the private sector through bail-in and extends the sectoral coverage to both banking and insurance’.127 • In the 2013 FSB survey on the progress of the implementation of G20/FSB recommendations in Indonesia, it was noted that: ‘[Bank Indonesia] is conducting a study to determine the appropriate [D-SIFI] framework for the Indonesian banking industry based on the BCBS document.’ 128 • On 28 February 2014 the FSB published its peer review of Indonesia.129 The peer review examined in particular changes to Indonesia’s regulatory structure and Indonesia’s crisis management arrangements. The review found that good progress had been made in several areas, although reforms are still on-going. The review noted the following in connection with resolution and recovery issues: — Resolution powers currently available to LPS do not include some of the required powers found in the Key Attributes (e.g., there is no power to impose a temporary stay on early termination rights, to establish an asset management company, to impose bail-in within resolution or to depart from equal treatment of the creditors of the same class). There is a recommendation to address these in the draft FSSN law, and to consider involving international bodies with relevant expertise to ensure that the FSSN law to be enacted is consistent with sound international practice. — Currently, systemic importance of a bank is based primarily on the bank’s asset size. There is a recommendation to finalise an assessment methodology, based on international guidance, to be able to identify D-SIBs at an early stage and to subject D-SIBs, once identified, to appropriate prudential, as well as recovery and resolution planning, requirements. — Resolution options currently available are open bank assistance or nationalisation. There is a recommendation to revise laws so as to avoid giving priority to open bank assistance and nationalisation as resolution options for a failing systemically important bank. — There is a recommendation to provide legal protection to all governmental officials involved in the crisis management and resolution process which go beyond the legal assistance protections currently in place for officials at BI, LPS and OJK. • On 31 March 2015, the OJK and the Dubai Financial Services Authority signed a memorandum of understanding on exchange of information and supervision capacity improvement. The memorandum covers exchange of skills and capacity improvement in several areas, including crisis management and resolution for financial institutions; cross-jurisdiction financial supervision; and cooperation in inter-authority supervision.130 • In March 2015, the IMF published a Country Report on Indonesia. The IMF found that “[g] aps remain in the financial stability architecture absent a fully developed regime for bank resolution and emergency liquidity assistance and harmonised arrangements for crisis management. To close these gaps, the draft FSSN law is currently being revised for resubmission to Parliament in 2015. In the interim, support to troubled banks would rely on the use of presidential decrees.”131 18 No. Jurisdiction Regulators/ authorities Comments • On 20 October 2015, the LPS and the Federal Deposit Insurance Corporation signed a memorandum of understanding to promote cooperation to maintain the stability of the banking system in their respective countries.132 • On 1 January 2016, the OJK issued a regulation requiring a capital surcharge for banks categorised as D-SIBs based on their systemic importance to the domestic financial system.133 Press reports indicate that the OJK chairman Muliaman D. Hadad, the OJK and the BI will coordinate to determine which banks should be regarded as D-SIBs, but do not intend to complete the list of D-SIBs until the FSSN bill is endorsed by the parliament.134 • On 17 March 2016, the Indonesian Parliament renamed the FSSN and passed the bill as the Financial System Crisis Prevention and Mitigation Law (Law No.9 of 2016) (FSCPM Law).135 The FSCPM Law provides a framework for financial institutions in preventing and handling system crisis. The FSCPM Law mandates the formation of a Financial System Stability Committee (KSSK), which is tasked with monitoring and maintaining financial stability and handling systemically important banks in distress. The FSCPM Law provides for periodic identification of systemically important banks, which would be required to meet additional regulatory capital and liquidity requirements. In case a systemically important bank encounters a solvability [sic] problem, the OJK will collaborate with the LPS to identify a solution. If the problem worsens, the KSSK will determine a resolution plan for the bank. The KSSK may advise the LPS to take over the bank, in which case the LPS may sell the bank’s assets and liabilities to another bank or a bridge bank established by the LPS. The FSCPM Law was signed into law by the President on 15 April 2016.136 • On 11 April 2016, the OJK published the Master Plan of Indonesia Financial Service 2015 – 2019,137 where strengthening the crisis management protocol and inter-institutional coordination was identified as one of the development objectives. • On 10 May 2016, the LPS and the Financial and Development Supervisory Agency signed a memorandum of understanding concerning the provision of assistance in bank resolution and capacity development.138 • The FSB’s 5th Report on Progress in Resolution described the status of implementation of the Key Attributes, based on self-reporting by national authorities. Indonesian authorities reported that the following Key Attributes had been implemented: i. powers to transfer or sell assets and liabilities; ii. powers to establish a temporary bridge institution; iii. powers to impose temporary stay on early termination rights; iv. resolution planning for systemic firms; and v. powers to require changes to firms’ structure and operations to improve resolvability Indonesian authorities reported partial implementation of powers to require changes to firms’ structure and operations to improve resolvability. Supervisory authorities have some powers to require supervised institutions to make changes to their business organisation and legal structure, but the purposes for and circumstances under which authorities can exercise such powers vary. • In relation to powers to write down and convert liabilities (bail-in), Indonesian authorities report that the powers conferred under the 2004 Law on Indonesia Deposit Insurance Corporation “to review, annul and terminate and/or alter any contracts between the Failing Bank that is rescued and third parties that are burdensome to the bank” also enable authorities to write down unsecured and uninsured creditor claims whereas the 2016 Law on Prevention and Resolution of Financial System Crisis confers powers to convert such claims into equity once the state of a general financial crisis has been declared. 19 No. Jurisdiction Regulators/ authorities Comments 11 Taiwan Financial Supervisory Commission (FSC); Central Bank of the Republic of China (Taiwan) (CBC) • In the CBC’s Financial Stability Report 2013, the CBC stated that it will impose additional supervisory requirements on D-SIFIs to reduce potential risks and that establishing a resolution mechanism for the insurance industry will be an important issue in the future.139 • On 20 May 2014, certain amendments to the Insurance Act were passed to enhance the supervisory measures on insurers experiencing operational difficulties. In particular, the amended Insurance Act includes a strengthened resolution regime, empowering receivers to deliberate a bridge plan for recovery and resolution of a failed insurer.140 • In February 2015, the FSC amended the Insurance Act so as to establish a prompt corrective action mechanism for the insurance industry. The amendment classifies insurance companies by RBC ratios into four tiers and requires the FSC to adopt different supervisory measures for companies in each tier. For companies classified as ‘capital seriously inadequate’, the FSC would take them over, close them down or dissolve them within a limited period of 90 days so as to enhance supervision on and establish an exit mechanism for the insurance industry.141 • In the CBC’s Financial Stability Report 2014, recommendations to strengthen the resolution regime for insurers, taking into account the Key Attributes, have been put forward. These include requiring insurers to prepare RRPs, which shall also be regularly reviewed. It was noted that ‘Some of [the recommendations] have been included in the Insurance Act amendments in May 2014 and will be implemented immediately. Others may be difficult to carry out in the near future; however, they can be incorporated as part of long-term reforms.’ 142 12 The Philippines Bangko Sentral ng Pilipinas (BSP); Philippine Deposit Insurance Corporation (PDIC) • On 29 October 2014, the BSP issued a set of guidelines setting out the assessment methodology for identifying D-SIBs and the additional supervisory requirements applicable to them. The list of D-SIBs will be determined annually by the BSP based on year-end data submitted by each bank with regards to pre-defined factors such as size, interconnectedness, substitutability and market reliance as a financial market infrastructure and complexity. The list will be released with the approval of the BSP Monetary Board in June each year. Compliance with the additional higher loss absorbency requirements will be phased in from 1 January 2017 with full implementation by 1 January 2019.143 • On 6 July 2015, the BSP completed its first determination of D-SIBs. Banks identified as D-SIBs are required to maintain additional Common Equity Tier 1, and must also in their Internal Capacity Adequacy Assessment Process document include acceptable recovery plans which will be carried out when they are in breach of capital requirements.144 • On 11 June 2016, Republic Act No.10846 amending the Charter of the PDIC took effect. The amendments allow depositors quicker access to their insured deposits in the event of bank closure, empower the PDIC to resolve problem banks, expedite the liquidation process for closed banks, and provide more severe sanctions and penalties for offences.145 20 Endnotes 1 HKMA Consultation Paper on a Framework for Systemically Important Banks in Hong Kong, http://www.hkma.gov.hk/media/eng/doc/key-functions/banking-stability/basel-3/consultation_on_framework_for_systemically_important_banks/HKMA_ Industry_consultation_on_SIB_framework.pdf 2 HKMA letter to the Hong Kong Association of Banks, http://www.hkma.gov.hk/media/eng/doc/key-functions/banking-stability/basel-3/consultation_on_framework_for_systemically_important_banks/Letter_to_ HKAB.pdf HKMA letter to the Deposit Taking Companies Association, http://www.hkma.gov.hk/media/eng/doc/key-functions/banking-stability/basel-3/consultation_on_framework_for_systemically_important_banks/Letter_to_ DTCA.pdf 3 HKMA Supervisory Policy Manual on recovery planning (RE-1), http://www.hkma.gov.hk/media/eng/doc/key-functions/banking-stability/supervisory-policy-manual/RE-1.pdf 4 HKMA 2014 Annual Report, http://www.hkma.gov.hk/media/eng/publication-and-research/annual-report/2014/ar2014_E.pdf 5 HKMA Supervisory Policy Manual on systemically important banks (CA-B-2), http://www.hkma.gov.hk/media/eng/doc/key-functions/banking-stability/supervisory-policy-manual/CA-B-2.pdf 6 HKMA Press Release, Designation of Domestic Systemically Important Authorised Institutions (D-SIBs), http://www.hkma.gov.hk/eng/key-information/press-releases/2015/20150316-3.shtml 7 HKMA 2014 Annual Report, http://www.hkma.gov.hk/media/eng/publication-and-research/annual-report/2014/ar2014_E.pdf 8 HKMA Press Release, Designation of D-SIBs, http://www.hkma.gov.hk/eng/key-information/press-releases/2015/20151231-3.shtml 9 HKMA Quarterly Bulletin December 2015, http://www.hkma.gov.hk/media/eng/publication-and-research/quarterly-bulletin/qb201512/fa1.pdf 10 FSB Principles on Loss-absorbing and Recapitalisation Capacity of G-SIBs in Resolution – Total loss-absorbing Capacity (TLAC) Term Sheet, http://www.fsb.org/wp-content/uploads/TLAC-Principles-and-Term-Sheet-for-publication-final.pdf 11 FSB Principles for Cross-border Effectiveness of Resolution Actions, http://www.fsb.org/wp-content/uploads/Principles-for-Cross-border-Effectiveness-of-Resolution-Actions.pdf 12 HKMA Supervisory Policy Manual on resolution planning (RE-2), http://www.hkma.gov.hk/media/eng/doc/key-functions/banking-stability/supervisory-policy-manual/RE-2.pdf 13 Consultation Paper on an Effective Resolution Regime for Financial Institutions in Hong Kong, jointly published by the FSTB, the HKMA, the SFC and the IA, http://www.fstb.gov.hk/fsb/ppr/consult/resolution_e.pdf 14 Second Consultation Paper on an Effective Resolution Regime for Financial Institutions in Hong Kong, jointly published by the FSTB, the HKMA, the SFC and the IA, http://www.gov.hk/en/residents/government/publication/consultation/docs/2015/RR.pdf 15 Consultation Response and Certain Further Issues on An Effective Resolution Regime for Financial Institutions in Hong Kong, jointly published by the FSTB, the HKMA, the SFC and the IA, http://www.fstb.gov.hk/fsb/ppr/consult/doc/resolutionregime_conclu_e.pdf 16 The Resolution Ordinance, http://www.gld.gov.hk/egazette/pdf/20162026/es12016202623.pdf 17 MAS Consultation Paper on Amendments to the Monetary Authority of Singapore Act, http://www.mas.gov.sg/~/media/resource/publications/consult_papers/2012/26%20December%202012%20Consultation%20Paper%20on%20%20 MAS%20Amendment%20Bill%202012.pdf 21 18 MAS Response to Feedback Received on the Consultation on Amendments to the Monetary Authority of Singapore Act, http://www.mas.gov.sg/~/media/resource/publications/consult_papers/2012/Response%20to%20Public%20Consult%20for%20MAS%20Amendment%20 Bill%205%20Feb%202013.pdf 19 FSB Thematic Review on Resolution Regimes, Peer Review Report, April 2013, Annex C, http://www.financialstabilityboard.org/wp-content/uploads/r_130411a.pdf, page 60. IMF Singapore: Detailed Assessment of Implementation — IOSCO Objectives and Principles of Securities Regulation, December 2013, http://www.imf.org/external/pubs/ft/scr/2013/cr13344.pdf, page 208. See also IMF Singapore: Detailed Assessment of Observance-Assessment of Observance of the CPSS-IOSCO Principles for Financial Market Infrastructures, December 2013, http://www.imf.org/external/pubs/ft/scr/2013/cr13345.pdf and IMF Singapore: Financial System Stability Assessment, November 2013, https://www.imf.org/external/pubs/ft/scr/2013/cr13325.pdf 20 MAS Annual Report 2014/15, http://www.mas.gov.sg/annual_reports/annual20142015/Annual%20Report.pdf 21 IMF Singapore: Detailed Assessment of Compliance on the Basel Core Principles for Effective Banking Supervision, December 2013, https://www.imf.org/external/pubs/ft/scr/2013/cr13342.pdf, page 64. 22 Ibid, pages 45 – 46. 23 MAS Consultation Paper on Proposed Framework for Systemically Important Banks in Singapore, http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/25%20Jun%202014%20CP%20on%20DSIB%20 Framework.pdf 24 MAS Response to Feedback Received - Consultation Paper on Proposed Framework for Systemically Important Banks in Singapore, http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/2015%20Apr%2030%20Response%20to%20Feedback%20 on%20DSIB%20Framework_Public%20Consult.pdf 25 MAS Publishes Framework for Domestic Systemically Important Banks in Singapore, http://www.mas.gov.sg/News-and-Publications/Media-Releases/2015/MAS-Publishes-Framework-for-Domestic-Systemically-Important-Banks-in-Singapore.aspx 26 Thematic Review on Supervisory Frameworks and Approaches for SIBs, http://www.financialstabilityboard.org/wp-content/uploads/Thematic-Review-on-Supervisory-Approaches-to-SIBs.pdf 27 MAS Consultation Paper on Proposed Enhancements to Resolution Regime for Financial Institutions in Singapore, http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/23%20Jun%202015%20Consultation%20on%20 Enhancements%20to%20Resolution%20Regime%20for%20FIs%20in%20Singapore.pdf 28 MAS Response to Feedback Received – Consultation Paper on Proposed Enhancements to Resolution Regime for Financial Institutions in Singapore, http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/Response%20to%20Consultation%20Feedback%20on%20 Enhanced%20Resolution%20Regime.pdf 29 MAS Consultation Paper on Proposed Legislative Amendments to Enhance the Resolution Regime for Financial Institutions in Singapore, http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/Proposed%20Legislative%20Amendments%20to%20 Enhance%20Resolution%20Regime%20for%20FIs%20in%20Singapore.pdf 30 MAS Explanatory Brief: Banking (Amendment) Bill 2016, http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-Statements/Speeches/2016/Explanatory-Brief-Banking-Amendment-Bill-2016.aspx 31 Bills introduced by the Parliament of Singapore, https://www.parliament.gov.sg/publications/bills-introduced 32 Resilience through resolvability – moving from policy design to implementation; 5th Report to the G20 on progress in resolution, http://www.fsb.org/wp-content/uploads/Resilience-through-resolvability-–-moving-from-policy-design-to-implementation.pdf 33 APRA Annual Report 2012, http://www.apra.gov.au/AboutAPRA/Publications/Pages/Annual-Report-2012.aspx 22 34 APRA Insight Issue 3 (2012), http://www.apra.gov.au/Insight/Documents/12-Insight-issue-3.pdf, pages 40 – 50. 35 Strengthening APRA’s Crisis Management Powers: Consultation Paper, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/Consultations/2012/APRA/Key%20Docs/PDF/Discussion%20Paper.ashx 36 APRA Annual Report 2013, http://www.apra.gov.au/AboutAPRA/Publications/Documents/2013_APRAAnnualReport.pdf, page 49. 37 APRA Information Paper: Domestic Systemically Important Banks in Australia, December 2013, http://www.apra.gov.au/adi/Publications/Documents/Information-Paper-Domestic-systemically-important-banks-in-Australia-December-2013.pdf FSB G20 Monitoring Progress Australia 2013, http://www.financialstabilityboard.org/implementation_monitoring/australia_2013.pdf, page 24. 38 APRA Annual Report 2013, http://www.apra.gov.au/AboutAPRA/Publications/Documents/2013_APRAAnnualReport.pdf, page 48. RBA Financial Stability Review, September 2013, http://www.rba.gov.au/publications/fsr/2013/sep/pdf/0913.pdf, page 61. 39 APRA Annual Report 2013, http://www.apra.gov.au/AboutAPRA/Publications/Documents/2013_APRAAnnualReport.pdf, page 64. 40 Determination of CCP Standards (Financial Stability Standards for Central Counterparties), http://www.rba.gov.au/payments-and-infrastructure/financial-market-infrastructure/clearing-and-settlement-facilities/standards/201212-new-fss-ris/pdf/ attachment-2.pdf See also RBA Quarter Bulletin, December 2013, http://www.rba.gov.au/publications/bulletin/2013/dec/pdf/bu-1213-5.pdf 41 APRA Prudential Standard CPS 220, January 2015, http://apra.gov.au/CrossIndustry/Documents/Prudential-Standard-CPS-220-Risk-Management-January-2015.pdf APRA Prudential Practice Guide CPS 220 – Risk Management, January 2015, http://apra.gov.au/CrossIndustry/Documents/Prudential-Practice-Guide-CPG-220-Risk-Management-January-2015.pdf 42 Ibid, paragraph 36(h). 43 APRA press release on CPS 220, 31 January 2014, http://www.apra.gov.au/MediaReleases/Pages/14_04.aspx 44 APRA Annual Report 2014, http://www.apra.gov.au/AboutAPRA/Publications/Documents/1410-AR-2013-Full.pdf, page 21. 45 Consultation Paper on the Resolution Regime for Financial Market Infrastructures, http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/Consultations/2015/Resolution%20regime%20for%20financial%20 market%20infrastructures/Key%20Documents/PDF/resolutionregime_fmi.ashx 46 Memorandum of Understanding between the RBA and the Bank of England, http://www.rba.gov.au/payments-and-infrastructure/payments-system-regulation/pdf/memorandum-2015-05-25.pdf 47 APRA 2015-2019 Corporate Plan, http://www.apra.gov.au/AboutAPRA/Publications/Pages/Corporate-Plan.aspx 48 APRA Annual Report 2015, http://www.apra.gov.au/AboutAPRA/Publications/Documents/20151030APRAAR.pdf.pdf 49 Improving Australia’s financial system – Government response to the Financial System Inquiry, http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2015/Government%20response%20to%20the%20 Financial%20System%20Inquiry/Downloads/PDF/Government_response_to_FSI_2015.ashx 23 50 Report on the Response to Consultation of the Resolution Regime for Financial Market Infrastructures: http://www.cfr.gov.au/publications/cfr-publications/2015/resolution-regime-financial-market/pdf/report.pdf 51 ASX Ltd Annual Report 2016, http://www.asx.com.au/documents/investor-relations/asx-annual-report-2016.pdf 52 Financial Stability Review by the Reserve Bank of Australia, April 2016: http://www.rba.gov.au/publications/fsr/2016/apr/dev-fin-sys-arch.html 53 Review of Regulations on Banks which Contribute to Stability of the Financial System, etc, http://www.fsa.go.jp/en/refer/councils/singie_kinyu/20130128/03.pdf 54 Changes to the Comprehensive Guideline for Supervision of Major Banks, http://www.fsa.go.jp/news/24/ginkou/20130207-1/02.pdf 55 Changes to the Comprehensive Guideline for Supervision of Financial Instruments Trading Business Provider, http://www.fsa.go.jp/news/24/ginkou/20130207-1/03.pdf Comprehensive Guidelines for Supervision of Financial Instruments Business Operators (English) IV-5-4-3, http://www.fsa.go.jp/en/refer/guide/instruments.pdf, page 188. FSB G20 Monitoring Progress Japan 2013, http://www.financialstabilityboard.org/implementation_monitoring/japan_2013.pdf, page 17. 56 Outline of 2013 Amendment Act of Financial Instruments and Exchange Act, etc., http://www.fsa.go.jp/en/refer/legislation/20130416/02.pdf FSA IADI APRC International Conference, Overview of work on resolution at the Financial Stability Board, 23 April 2014, presented by Masamichi Kono, Vice Commissioner for International Affairs FSA, http://www.fsa.go.jp/common/conference/danwa/20140423/02.pdf, page 11. 57 FSA Annual Supervisory Policy for Major Banks for Program Year 2013, http://www.fsa.go.jp/en/refer/measures/20131206-3/01.pdf, page 12. FSA Annual Supervisory Policy for Financial Instruments Business Operators, etc for Program Year 2013, http://www.fsa.go.jp/en/refer/measures/20131206-1/01.pdf, page 9. 58 Annual Financial Institutions Monitoring Policy for Program Year 2014, http://www.fsa.go.jp/news/26/20140911-1/01.pdf 59 DICJ Operational Policy April 2015 – March 2016, http://www.dic.go.jp/english/e_kikotoha/e_chuki/e_hoshin/e_fy2015.html 60 Thematic Review on Supervisory Frameworks and Approaches for SIBs, http://www.financialstabilityboard.org/wp-content/uploads/Thematic-Review-on-Supervisory-Approaches-to-SIBs.pdf 61 FSB G20 Monitoring Progress Korea 2012, http://www.financialstabilityboard.org/publications/r_120619ll.pdf, page 11. FSB G20 Monitoring Progress Korea 2013, http://www.financialstabilityboard.org/implementation_monitoring/korea_2013.pdf, page 13. 62 IMF Technical Note - Republic of Korea, Crisis Preparedness and Crisis Management Framework, https://www.imf.org/external/pubs/ft/scr/2015/cr1505.pdf 63 FSS Implements D-SIB Framework for the Domestic Banking Sector, http://english.fss.or.kr/fss/en/media/release/view.jsp?bbsid=1289277491315&category=null&idx=1433392072838&num=992&color=green 64 FSC Press Release, FSC Improves Prudential Standards across Financial Sectors, https://www.fsc.go.kr/eng/new_press/releases.jsp?menu=01&bbsid=BBS0048&selYear=2015&nxPage=2 65 FSC Press Release, Direction for Recovery and Resolution Regimes – Recovery and Resolution Plan for Major Financial Institutions, https://www.fsc.go.kr/eng/new_press/releases.jsp?menu=01&bbsid=BBS0048&selYear=2015 24 66 FSC Press Release, Amendments to the Regulation of Supervision of Banking Business & the Supervisory Regulation on Financial Holding Companies, https://www.fsc.go.kr/eng/new_press/releases.jsp?menu=01&bbsid=BBS0048&selYear=2015 67 FSC Press Release, FSC Identifies D-SIBs for 2016, https://www.fsc.go.kr/eng/new_press/releases.jsp?menu=01&bbsid=BBS0048&selYear=2015 68 Second Thematic Review on Resolution Regimes, http://www.fsb.org/wp-content/uploads/Second-peer-review-report-on-resolution-regimes.pdf 69 International Monetary Fund, Malaysia: Report on the Observance of Standards and Codes (Feb 2013), http://www.imf.org/external/pubs/ft/scr/2013/cr1353.pdf, page 9. 70 BNM Governor’s statement, 19 March 2014, http://www.bnm.gov.my/files/publication/fsps/en/2013/cp00_003_gov_statement.pdf 71 Ibid, page 3. 72 BNM Assistant Governor’s speech, 15 September 2015, http://www.bnm.gov.my/index.php?ch=en_speech&pg=en_speech_all&ac=569&lang=en 73 PIDM Press Release, PIDM enhances intervention and resolution powers with new amendments to PIDM Act, http://www.pidm.gov.my/Media/Press-Releases/PIDM-enhances-intervention-and-resolution 74 Official Portal e-Federal Gazette, Malaysian Federal Government, http://www.federalgazette.agc.gov.my/eng_main/main_akta.php?jenis_akta=Pindaan 75 Summary of the PIDM Corporate Plan 2016-2018, http://www.pidm.gov.my/downloads/2016/pidm-cp-2016-2018-en.pdf 76 PIDM releases Corporate Plan 2016 – 2018 - Towards Long-Term Sustainability, http://www.pidm.gov.my/Media/Press-Releases/PIDM-Corporate-Plan-2016 77 PIDM Annual Report 2015, http://www.pidm.gov.my/downloads/2016/en/Annual-report-pidm-2015-en.pdf 78 Governor's Keynote Address at the ASLI 20th Malaysian Banking Summit, http://www.bnm.gov.my/index.php?ch=en_speech&pg=en_speech_all&ac=610&lang=en 79 Police Document on Corporate Governance by Bank Negara Malaysia, http://www.bnm.gov.my/guidelines/01_banking/04_prudential_stds/CorporateGovernance_Aug2016.pdf 80 FSB G20 Monitoring Progress China 2012, http://www.financialstabilityboard.org/publications/r_120619ee.pdf, page 13. 81 Ibid. 82 FSB G20 Monitoring Progress China 2013, http://www.financialstabilityboard.org/implementation_monitoring/china_2013.pdf, page 14. 83 Ibid, page 13. 84 Ibid, page 25. 85 PBC Financial Stability Report 2013, http://www.pbc.gov.cn/eportal/fileDir/image_public/UserFiles/english/upload/File/%E4%B8%AD%E5%9B%BD%E9%87%91%E8%9E%8D%E7%A8%B3 %E5%AE%9A%E6%8A%A5%E5%91%8A2013%EF%BC%88%E8%8B%B1%E6%96%87%E7%89%88%EF%BC%89.pdf, pages 38, 217 – 218. 25 86 CBRC Guidance on Disclosure by Commercial Banks of Information relating to Assessment of Global Systemic Importance, http://www.cbrc.gov.cn/chinese/home/docDOC_ReadView/5E453E74F3F0468CB05F535B82466704.html 87 PBC Financial Stability Report 2014, http://www.pbc.gov.cn/eportal/fileDir/image_public/UserFiles/english/upload/File/%E4%B8%AD%E5%9B%BD%E9%87%91%E8%9E%8D%E7%A8%B3 %E5%AE%9A%E6%8A%A5%E5%91%8A2014%E8%8B%B1%E6%96%87%E7%89%88(1).pdf 88 CBRC Guidance on Risk Management and Supervision of Trust Companies, http://www.cbrc.gov.cn/govView_69DB963082914C498028012863245973.html 89 PBC Financial Stability Report 2015, http://www.pbc.gov.cn/english/130736/2946072/2015090616281480816.pdf 90 The CBRC Encourages the Banking Sector to Support the Belt and Road Initiative, http://www.cbrc.gov.cn/EngdocView.do?docID=7625F9239CA944B682CB9D43B8ADD190 91 FSB Press Release, FSB publishes the 2015 update of the G-SIB list, http://www.fsb.org/wp-content/uploads/FSB-announces-2015-update-of-group-of-global-systemically-important-banks-G-SIBs.pdf 92 PBC Press Release, Communiqué G20 Finance Ministers and Central Bank Governors Meeting 14-15 April 2016, Washington D.C., http://www.pbc.gov.cn/english/130721/3048962/index.html 93 PBC’ Financial Stability Report, 2016 http://www.pbc.gov.cn/english/130736/3130899/2016083016542843186.pdf 94 RBNZ Financial Stability Report 2013 May, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Financial%20stability%20reports/fsr-may13.pdf, page 38. 95 RBNZ Open Bank resolution Pre-positioning Requirements Policy, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/banks/banking-supervision-handbook/5341478.pdf?la=en 96 RBNZ Consultation Document: Strengthening Statutory Payment Oversight Powers, http://rbnz.govt.nz/~/media/ReserveBank/Files/regulation-and-supervision/financial-market-infrastructure-oversight/5195423.pdf 97 RBNZ Summary of Submissions Received on the Consultation on Strengthening Statutory Payment Oversight Powers and the Reserve Bank’s Responses http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/financial-market-infrastructure-oversight/5476599.pdf?la=en 98 RBNZ Policy Statement: Oversight of Financial Market Infrastructures in New Zealand, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/financial-market-infrastructure-oversight/oversight-of-financial-marketinfrastructures-in-new-zealand.pdf?la=en 99 RBNZ Policy Statement: The Designation and Oversight of Designated Settlement Systems, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/financial-market-infrastructure-oversight/the-designation-and-oversight-ofdesignated-settlement-systems-dss1.pdf?la=en 100 RBNZ Financial Stability Report, May 2014, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Financial%20stability%20reports/fsr-may14.pdf, page 45. 101 RBNZ Financial Stability Report, May 2015, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Financial%20stability%20reports/fsr-may2015.pdf 102 RBNZ Consultation Document: Regulatory Stocktake of the Prudential Requirements Applying to Registered Banks, http://rbnz.govt.nz/~/media/ReserveBank/Files/regulation-and-supervision/banks/consultation-document-regulatory-stocktake.ashx 103 RBNZ Consultation Document: Oversight of Designated Financial Market Infrastructures, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/financial-market-infrastructure-oversight/oversight-of-designated-financialmarket-infrastructures.pdf?la=en 26 104 RBNZ Financial Stability Report, November 2015, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Financial%20stability%20reports/fsr-nov2015.pdf RNBZ Conclusions of its regulatory stocktake, http://www.rbnz.govt.nz/regulation-and-supervision/regulatory-stocktake 105 RBNZ Summary of submissions and final policy proposals on the Consultation Paper: Oversight of Designated Financial Market Infrastructures, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/financial-market-infrastructure-oversight/regulatory%20developments/ summary-of-submissions-and-final-policy-proposals-FMI-oversight-dec-2015.pdf 106 Reserve Bank consults on a crisis management regime for financial market infrastructures, http://www.rbnz.govt.nz/news/2016/03/reserve-bank-consults-on-a-crisis-management-regime-for-financial-market-infrastructures 107 RBNZ Summary of submissions and final policy proposals on the Consultation Paper: Crisis Management Powers for Systemically Important Financial Market Infrastructures, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/financial-market-infrastructure-oversight/2016-08-summary-of%20 submissions-on-FMI-crisis-management.pdf?la=en 108 RBNZ Financial Stability Report, May 2016, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Financial%20stability%20reports/2016/fsr-may2016.pdf 109 RBNZ Consultation paper: Revised policy proposals for the review of the outsourcing policy for registered banks, http://www.rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/banks/consultations/Final-consultation-outsourcing-policy-for-registeredbanks-May2016.pdf?la=en 110 RBI Second Quarter Review of Monetary Policy 2012-13, http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7647&Mode=0, paragraph 100. 111 RBI Financial Stability Report No 6: December 2012, http://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FFSR261212_FL.pdf, page 64. 112 RBI Financial Stability Report No 7: June 2013, http://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FSPI260613FL.pdf, page 70. 113 RBI Report of the Working Group on Resolution Regimes for Financial Institutions, 2 May 2014, http://rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=767 114 SEBI Press Release dated 2 May 2014, http://www.sebi.gov.in/cms/sebi_data/pdffiles/27924_t.pdf 115 RBI Framework for Dealing with Domestic Systemically Important Banks, http://rbidocs.rbi.org.in/rdocs/Content/PDFs/FDSIBF220714.pdf 116 Thematic Review on Supervisory Frameworks and Approaches for SIBs, http://www.financialstabilityboard.org/wp-content/uploads/Thematic-Review-on-Supervisory-Approaches-to-SIBs.pdf 117 RBI Identifies Domestic Systemically Important Banks, https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=34862 118 RBI Press Release, RBI signs MoU on “Supervisory Cooperation and Exchange of Supervisory Information” with Prudential Regulation Authority and Financial Conduct Authority, UK, https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=35607 119 RBI Financial Stability Report, December 2015, https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/0FSR6F7E7BC6C14F42E99568A80D9FF7BBA6.PDF 120 RBI Financial Stability Report, June 2016, https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/7_CH3068175297DA3469389D7EC991889F98C.PDF 27 121 Report of Committee to Draft Code on Resolution of Financial Firms published by the Government of India, Ministry of Finance, http://finmin.nic.in/fslrc/report_rc_sept21.pdf 122 The Financial Resolution and Deposit Insurance Bill 2016 of India, http://finmin.nic.in/fslrc/FRDI%20Bill-27092016.pdf 123 Note on summary of the recommendations of the Committee published by the Government of India, Ministry of Finance, http://finmin.nic.in/fslrc/SummaryFRDI_Bil28092016.pdf 124 FSB G20 Monitoring Progress Indonesia 2011, http://www.financialstabilityboard.org/publications/r_111104j.pdf, page 5. 125 FSB G20 Monitoring Progress Indonesia 2012, http://www.financialstabilityboard.org/publications/r_120619ii.pdf, pages 14–15. 126 LPS Akan Kantongi Jaminan Hukum Kuat Setelah Pengesahan RUU JPSK http://www.indonesianparliament.com/news/613-lps-akan-kantongi-jaminan-hukum-kuat-setelah-pengesahan-ruu-jpsk.html 127 FSB Thematic Review on Resolution Regimes, Peer Review Report, April 2013, Annex C, http://www.financialstabilityboard.org/publications/r_130411a.pdf, page 38. 128 FSB G20 Monitoring Progress Indonesia 2013, http://www.financialstabilityboard.org/implementation_monitoring/indonesia_2013.pdf, page 16. 129 FSB Peer Review of Indonesia, http://www.financialstabilityboard.org/publications/r_140228.pdf 130 OJK Press Release, OJK and Dubai Financial Services Authority Sign MoU on Exchange of Information and Supervision Capacity Improvement, http://www.ojk.go.id/Files/201504/SiaranPers_MOUOJKDUBAIFSA31Maret2015_1427868436.pdf Dubai Financial Services Authority Press Release, The DFSA Strengthens Ties with Indonesian Regulator, http://dfsa.complinet.com/net_file_store/new_rulebooks/d/f/DFSA_StrengthenTies_With_IndonesianRegulator_April_2015.pdf 131 IMF Country Report on Indonesia, http://www.imf.org/external/pubs/ft/scr/2015/cr1574.pdf, page 23. 132 LPS Press Release, LPS dan FDIC Tandatangani Nota Kesepahaman (MoU) Perkuat Kerjasama antar Kedua Lembaga, http://www.lps.go.id/en/web/guest/siaran-pers/-/asset_publisher/1T0a/content/artik-1?_101_INSTANCE_1T0a_redirect=http%3A%2F%2Fwww.lps.go.id% 2Fen%2Fweb%2Fguest%2Fsiaran-pers%3Fp_p_id%3D101_INSTANCE_1T0a%26p_p_lifecycle%3D0%26p_p_state%3Dnormal%26p_p_ mode%3Dview%26p_p_col_id%3Dcolumn-2%26p_p_col_count%3D1%26_101_INSTANCE_1T0a_advancedSearch%3Dfalse%26_101_ INSTANCE_1T0a_keywords%3D%26_101_INSTANCE_1T0a_delta%3D5%26p_r_p_564233524_resetCur%3Dfalse%26_101_INSTANCE_1T0a_ cur%3D3%26_101_INSTANCE_1T0a_andOperator%3Dtrue 133 OJK Press Release, Penetapan Systemically Important Bank dan Capital Surcharge, http://www.ojk.go.id/id/kanal/perbankan/regulasi/peraturan-ojk/Documents/Pages/POJK-46-PENETAPAN-SIB-CAPITAL-SURCHARGE/SALINAN-POJK%20 D-SIB%20F.pdf 134 The Jakarta Post, OJK starts listing ‘important’ banks, http://m.thejakartapost.com/news/2016/01/02/ojk-starts-listing-important-banks.html 135 Fitch: Indonesia Bank Support Unchanged By New Financial System Law, https://www.fitchratings.com/site/pressrelease?id=1001602 136 The Jakarta Post, Preventing, handling financial system crises, http://www.thejakartapost.com/academia/2016/05/17/preventing-handling-financial-system-crises.html 137 Development Objectives and Direction of The Master Plan of Indonesia Financial Service 2015–2019, http://www.ojk.go.id/en/berita-dan-kegiatan/info-terkini/Pages/The-Master-Plan-of-Indonesia-Financial-Service-2015-2019.aspx freshfields.com This material is provided by the international law firm Freshfields Bruckhaus Deringer LLP (a limited liability partnership organised under the law of England and Wales) (the UK LLP) and the offices and associated entities of the UK LLP practising under the Freshfields Bruckhaus Deringer name in a number of jurisdictions, and Freshfields Bruckhaus Deringer US LLP, together referred to in the material as ‘Freshfields’. 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This material is for general information only and is not intended to provide legal advice. © Freshfields Bruckhaus Deringer llp, October 2016, 05683 138 Press Release - LPS dan BPKP Kerjasama Penanganan Resolusi Bank: http://www.lps.go.id/web/guest/siaran-pers/-/asset_publisher/1T0a/content/press-release-lps-dan-bpkp-kerjasama-penanganan-resolusi-bank?_101_ INSTANCE_1T0a_redirect=http%3A%2F%2Fwww.lps.go.id%2Fweb%2Fguest%2Fsiaran-pers%3Fp_p_id%3D101_INSTANCE_1T0a%26p_p_ lifecycle%3D0%26p_p_state%3Dnormal%26p_p_mode%3Dview%26p_p_col_id%3Dcolumn-2%26p_p_col_count%3D1%26_101_INSTANCE_1T0a_ advancedSearch%3Dfalse%26_101_INSTANCE_1T0a_keywords%3D%26_101_INSTANCE_1T0a_delta%3D5%26p_r_p_564233524_ resetCur%3Dfalse%26_101_INSTANCE_1T0a_cur%3D3%26_101_INSTANCE_1T0a_andOperator%3Dtrue 139 CBC Financial Stability Report May 2013, http://www.cbc.gov.tw/public/Attachment/3111211174971.pdf, pages 80 and 90. 140 Amendments to the Insurance Act of Taiwan, http://law.moj.gov.tw/Eng/news/news_detail.aspx?SearchRange=G&id=7950&k1=Insurance+Act, article 149. 141 CBC Financial Stability Report May 2015, http://www.cbc.gov.tw/public/Attachment/5101911451571.pdf, page 111. 142 CBC Financial Stability Report May 2014, http://www.cbc.gov.tw/public/Attachment/41069422171.pdf, pages 94 to 98. 143 BSP Framework for Dealing with Domestic Systemically Important Banks, http://www.bsp.gov.ph/downloads/regulations/attachments/2014/c856.pdf 144 BSP Identifies Domestic Systemically Important Banks, http://www.bsp.gov.ph/publications/media.asp?id=3771 145 PDIC Republic Act No. 10846, http://www.pdic.gov.ph/index.php?nid1=8&nid2=1&nid=100893 For more information please contact: Royce Miller Partner T +852 2846 3498 E [email protected] Yuxin Shen Counsel T +86 21 6405 4177 E [email protected] Jesal Patel Senior Associate T +852 2913 2707 E [email protected] Wings Turkington Senior Knowledge Lawyer T +852 2846 3358 E [email protected] Shinsuke Kobayashi Counsel T +81 3 3584 8527 E [email protected] Simon Hawkins Senior Associate T +852 2846 3312 E [email protected] Look Chan Ho Head of Restructuring and Insolvency, Asia T +852 2913 2741 E [email protected]