BNM issues Policy Document on Recovery Planning
30 July 2021
On 28 July 2021, Bank Negara Malaysia (“
BNM”) issued the
Policy Document on Recovery Planning (“
Policy Document”) which came into effect immediately.
The Policy Document applies to the following institutions under the Financial Services Act 2013 or the Islamic Financial Services Act 2013:
- Financial holding companies
- Licensed banks
- Licensed Islamic banks
- Licensed investment banks
The Policy Document, amongst others, sets out:
- the key principles, requirements and expectations of BNM in relation to the development and maintenance of recovery plans by financial institutions; and
- the requirement for each financial institution to identify and plan for the execution of a suite of recovery options to restore its long-term viability under a range of idiosyncratic and system-wide stress events.
According to the Policy Document, the recovery plan will serve as “an overarching “playbook” that is developed, maintained, and when necessary, executed by a financial institution to manage severe stress events that threaten to undermine the financial institution’s viability.” The Policy Document further states that the recovery plan should not take into account the possibility of policy intervention by authorities, or access to exceptional financial support from public funds.
A financial institution is required to submit its first recovery plan to BNM within 18 months from the date it receives a written request from BNM together with completed reporting templates listed in Appendix 1 of the Policy Document.
A financial institution is also required to keep its recovery plan submitted to BNM updated, and to notify BNM as and when:
- there are material changes to its corporate, shareholding, governance structure, or financial position, risk profile, or business strategy and operations; and
- any other circumstances arise that may significantly affect its recovery plan.
Details of any changes made by a financial institution to its recovery plan are to be submitted to BNM within 14 days from the date such changes are internally approved.
Alert by Kok Chee Kheong (Partner) of the Corporate Practice of Skrine
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such.