FAQs

As part of resolution planning requirements, member banks are expected to address the impediments to resolution including building and maintaining the necessary capabilities to support the effective implementation of the resolution plan. This expectation is an example of resolution planning requirement that should be considered and incorporated into a member bank’s existing risk management framework and governance process.

How will member banks be categorised based on complexities, especially for non–Domestic Systematically Important Banks (“D-SIBs”)?

Given that each member bank is different in terms of their size, business profile, complexity and resource capacity, RSP will be undertaken in a proportionate manner, without undermining the end goal of resolvability.

For example, a smaller and less complex member bank may be subjected to less extensive requirements, needing lesser time and resources to achieve the intended resolvability outcome.

The categorisation of member banks in relation to their size, complexities, interconnectedness, amongst others, will be based on PIDM’s assessment.

In relation to information requirements, PIDM will leverage largely on information submitted by a member bank under BNM’s recovery planning process.

The information requirement in RSP will extend from the information obtained from recovery planning and will be tailored based on the specificities of a member bank, in line with the principle of proportionality.

Where required, PIDM will provide further guidance on information requirements, as and when PIDM engages with the member bank during the RSP process.

Unlike during business as usual or recovery where contingency planning can be carried out on a group-wide basis, in the event of a resolution, the member bank will be resolved on a legal entity basis. For purposes of RSP, a resolution plan assumes the worst-case scenario where fungibility of capital would not be available within the financial group once resolution is triggered. Hence, the resolution plan is developed on the basis that the relevant resolution powers under PIDM Act will be exercised by PIDM on each non-viable member bank to ensure a prompt and orderly resolution.

Some member banks may not have a specific recovery plan given that the recovery plan is prepared by the financial holding company or the apex entity of the financial group (e.g. an Islamic member bank which is a subsidiary or an affiliate company of another DTM does not have a recovery plan as a starting point for resolution planning). What are the roles of non-member banks within the financial group, including the extent of involvement in the resolution planning process?

For an Islamic member bank which is a subsidiary or an affiliate company of another 

member bank, in the absence of a member bank specific recovery plan, PIDM will leverage on the information in the recovery plan prepared by the financial holding company or the apex entity of the member bank group as a starting point and request for additional information, as necessary, on a tailored and targeted basis.

In line with the objective to preserve financial stability, the resolution plan for each member bank will consider material interdependencies and interconnectedness within the member bank group, including any non-member banks, to the extent they would affect the member bank in resolution.

PIDM intends to incorporate elements of resolvability into the DPS Framework when PIDM and member banks have collectively progressed towards and achieved an advanced stage of resolvability.

Based on the experiences in other jurisdictions, achieving maturity in resolvability assessment and the ability of member banks to identify and remediate impediments to resolution may take several years.

In the interim, as part of the incentive to promote and maintain resolvability of member banks, PIDM has introduced three (3) new resolution-centric criteria (“RCC”) within the revised DPS Framework which will take effect from assessment year 2025. The revised DPS Guidelines that incorporated the RCC is available on PIDM website.

Further enhancements will be made to the revised DPS Guidelines, considering PIDM’s assessment framework on resolvability. The work undertaken in recovery planning, to the extent that it will improve resolvability, may be considered as part of the overall resolvability assessment, as appropriate. PIDM will consult the industry, when appropriate.

Will a more realistic timeline (e.g. six months) be given to a DTM to respond to the RRL, considering the extensive preparatory work required? Furthermore, under certain scenarios and given the complexity of issues, a member bank should be given the flexibility to determine the response timeline.

The PRS(s) will be communicated to the member bank, as part of the outcome in the first stage of the resolution planning approach. The DTM may provide feedback and express its views on the PRS(s), if any, supported by rationale and justifications, for PIDM’s consideration.

Separately, the RRL will be issued by PIDM to the member bank annually or as and when required, to communicate with the member bank’s Board on the progress and issues (if any) related to the RSP process.

PIDM expects to engage the member bank by way of regular discussions throughout the RSP process. The member bank is required to respond to the RRL in writing within three (3) months from the date of the RRL or any other timeline as may be stated in the RRL, depending on the nature or complexity of the issues/progress. The timing and intervals for subsequent periodic updates (if any) by the member bank on RSP shall be determined between PIDM and the member bank as part of ongoing engagement.

This is because some activities within RSP are beyond the control of the member bank (e.g. member bank not responsible in setting the PRS, developing the resolvability expectations and implementing the actual resolution actions).

Both PIDM and member banks have their respective roles to play in the RSP process. To ensure that a member bank achieves a state of readiness to support an effective resolution i.e. to be resolvable, the member bank’s Board is responsible to set the tone from the top and to ensure the necessary capabilities, in line with the resolvability expectations determined by PIDM, are put in place for the member bank to be resolved in an effective and orderly manner.

and (b) the criteria/qualification required for the designation of senior officer(s) to be responsible for RSP?

In relation to the feasibility assessment, the member bank’s Board is required to oversee and approve the feasibility assessment. The member bank’s Board may designate senior officer(s) or an internal governing body to support the member bank’s Board throughout the RSP process including undertaking the feasibility assessment.

For the definition of “senior officer”, please refer to PIDM RSP Guidelines.

It is not a requirement that the designated senior officer(s) for RSP must be the same person(s) for recovery planning. The member bank will need to assess and consider the arrangement which best suits the member bank, considering the roles and responsibilities expected of the senior officer(s) in recovery planning and RSP, such as ensuring consistency and comparability between the two.

Nonetheless, if it is feasible and practicable, it may be advantageous for a member bank to have cross membership of the recovery planning and RSP teams to ensure efficiency and continuity, given the close inter-linkages between recovery planning and RSP.

What is the estimated timeframe for PIDM to validate the primary PRS, and the timeline for a member bank to provide feedback on the PRS validated by PIDM?

The primary PRS for all member banks, including foreign banks incorporated in Malaysia, will be the transfer strategy.

The transfer strategy is most suitable for member banks as it ensures continuity of critical functions and services, minimises disruption to the financial system and preserves franchise value. However, the feasibility of any PRS could be impacted by other factors beyond PIDM’s control (e.g. no suitable purchaser at the point of resolution). Hence, PIDM may require a member bank to be prepared for an alternate PRS. PIDM will validate the primary PRS based on the information submitted by a member bank in its recovery plan to BNM. Depending on the extent of additional information or clarification required, PIDM targets to firm up the primary PRS between six (6) to twelve (12) months from the submission date of the recovery plan. PIDM will engage member banks throughout the RSP process, where necessary. In terms of the timeline for a member bank to provide feedback on the PRS, PIDM will work together with the member bank and determine a reasonable timeline that will allow the member bank to provide feedback on the PRS(s).

The PRS determined by PIDM is the “presumptive” path for the purpose of RSP during business-as-usual. There may be circumstances or situations at the time of resolution that necessitate a different resolution strategy (individually or in combination) that is assessed by PIDM to be the most suitable to be implemented by PIDM, instead of the planned strategy (PRS or alternate PRS). Nevertheless, the support of the member bank and its management is crucial to ensure the effective implementation of the resolution actions at that point in time.