HKMA launched a two-month public consultation on a set of proposed rules related to loss-absorbing capacity (LAC) requirements for authorized institutions under the Financial Institutions (Resolution) Ordinance (Cap. 628). Comments are due by March 16, 2018. HKMA intends to introduce the rules as subsidiary legislation under the Ordinance into the Legislative Council for negative vetting later in 2018.
The consultation sets out detailed proposals on minimum LAC requirements for authorized institutions. The proposals are designed to be aligned with the international standards on loss-absorbing capacity set by FSB in its Total Loss-absorbing Capacity (TLAC) Term Sheet. In drawing up the proposed rules, HKMA has taken these standards into account and made reference to the approaches adopted in comparable overseas jurisdictions. The consultation invites views from any interested parties, including industry, academia and the general public, on all aspects of those proposals, including on the scope of institutions that will be covered, calibration of minimum requirements, eligibility criteria for LAC instruments, restrictions on the sale, and distribution of LAC instruments and safeguards.
The Ordinance established a cross-sectoral resolution regime for financial institutions that is fully compliant with the international standards. It confers on HKMA, as the resolution authority for the banking sector, statutory responsibilities and powers to enable it to manage any future failure of an authorized institution in an orderly manner that avoids disruption to financial stability and minimizes the risk to public funds. The Ordinance was enacted by the Legislative Council on June 22, 2016. The main provisions of the Ordinance came into operation on July 07, 2017.
Comment Due Date: March 16, 2018
Keywords: Asia Pacific, Hong Kong, Banking, TLAC, Resolution Regime, HKMA
Previous ArticleClaudia Buch of Bundesbank on Evaluating Financial Sector Reforms
Next ArticleFSB Reports on Reforms to OTC Derivatives Markets
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).
ECB published results of the financial stability review in May 2020. Among other issues, the financial stability review assesses operations of the financial system so far during the COVID-19 pandemic.
Financial policymakers and international standard-setters met virtually with private-sector executives to discuss international policy responses to COVID-19 pandemic.
ESMA published a letter responding to IASB on the exposure draft on the phase 2 of the interest rate benchmark reform.
HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
EBA published thematic note presenting a preliminary assessment of the impact of COVID-19 outbreak on the banking sector in EU.