HKMA Updates Liquidity Facilities Framework for Banks
HKMA updated the framework for provision of HKD liquidity to authorized institutions, with immediate effect. Post completion of a review of the framework, HKMA has introduced a new Resolution Facility to provide for the scenario in which HKMA exercises resolution powers under the Financial Institutions (Resolution) Ordinance (FIRO), as the designated resolution authority. HKMA also made a number of refinements to various established arrangements within the updated framework. In this framework, “banks” refers to licensed banks, restricted license banks, and deposit-taking companies.
Through the different liquidity facilities, HKMA makes temporary HKD liquidity (that is, not in the nature of capital support) available to authorized institutions to maintain integrity and stability of the monetary and financial systems in Hong Kong. The updated liquidity facilities framework makes operational an important part of the resolution regime in Hong Kong and takes forward a key recommendation of the 2018 Peer Review of Hong Kong by FSB. The updated liquidity facilities framework comprises the following:
- Settlement Facilities (Intraday repo and discount window), the objective of which is to facilitate smooth operation of the interbank payment system and thus preserve systemic stability.
- Standby Liquidity Facilities (including term repos and foreign exchange swaps), the objective of which is to make term liquidity available to authorized institutions to enable them to manage any unexpected liquidity tightness which they may encounter.
- Contingent Term Facility, which makes reference to the guiding principles of the previous Lender of Last Resort arrangements. It may be made available, at the discretion of HKMA, to an authorized institution facing extraordinary liquidity stress that cannot be overcome through other means.
- Resolution Facility, which is designed to provide for the scenario in which resolution powers under the FIRO are exercised by HKMA as the resolution authority.
The newly introduced Resolution Facility may be made available, at the discretion of HKMA, having regard to systemic stability, for ensuring that an authorized institution that has (or whose holding company has) gone into resolution in Hong Kong has sufficient liquidity to meet its obligations, until such time as the authorized institution is able to transition back to market-based funding. The terms on which liquidity is provided under the Resolution Facility will be set by the HKMA on a case-by-case basis. The Resolution Facility will be available only where resolution has been initiated under the FIRO. Additionally, any losses arising from assistance provided under the Resolution Facility may ultimately be recovered pursuant to the levy arrangements that may be imposed under the FIRO. This updated framework supersedes the “Policy Statement on the Role of the Hong Kong Monetary Authority as Lender of Last Resort,” which was issued in March 2009.
Keywords: Asia Pacific, Hong Kong, Banking, Systemic Risk, Liquidity Facility, Lender of Last Resort, Resolution Ordinance, HKMA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Related Articles
EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
FSB Sets Out Work Priorities for 2021
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU Publishes Corrigendum to Revised Capital Requirements Regulation
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs Issue Statement on Application of Sustainability Disclosures Rule
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC Consults on Crisis Management and Deposit Insurance Frameworks
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA Proposes Standards for Supervisory Cooperation Under IFD
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE Addresses Banks in Scope of First Resolvability Assessment
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.