2 August 2021
Financial Institutions (Resolution) (Contractual Recognition of Suspension of Termination Rights – Banking Sector) Rules (the Stay Rules) will come into operation on 27 August 2021.
Hong Kong joins jurisdictions such as the United States, the United Kingdom and the European Union in preparing to put in place rules requiring financial institutions to include provisions in a range of financial contracts preventing the exercise of termination rights against those financial institutions if they fall into financial distress. The purpose of the Stay Rules is to ensure that resolution actions taken by a regulator of a distressed financial institution are not inhibited. Below, we take a closer look at the Stay Rules and their impact on capital markets, finance, and derivatives documentation governed by non-Hong Kong law.