HKMA published the September 2019 issue of its Quarterly Bulletin, which featured an article that provides an overview of the ex-post public money recovery arrangements under the Financial Institutions (Resolution) Ordinance (FIRO). The article provides an overview of the resolution levy provisions under Part 12 of the FIRO, in relation to the imposition of an ex-post resolution levy to recoup any resolution funds (that is, public money paid into the resolution funding account) that was used, but not repaid, on completion of a resolution. The article represents the initial views of HKMA on this subject and should not be taken as expressing a fixed policy intent of HKMA.
One fundamental objective of the resolution regimes is to reduce the risks of public funds being used to bail out failed systemically important financial institutions. To this end, the resolution funding arrangements under the Hong Kong resolution regime provide an ex-post levy mechanism to recover, from the wider financial system, public money paid into the resolution funding account and used in a resolution, but not repaid on completion of the resolution. An ex-post levy mechanism is consistent with international standards and has been adopted by resolution regimes in certain other jurisdictions. In 2017, FSB conducted a peer review of Hong Kong covering, among others, the Hong Kong resolution regime and published its report in 2018. One of the recommendations made in the peer review report was that authorities in Hong Kong should continue operationalizing resolution funding mechanisms, including the resolution levy framework to “underscore the authorities’ intent to recoup public funds.”
In light of this recommendation, HKMA has been considering how an ex-post resolution levy may operate in relation to the within scope financial institutions, under the HKMA remit as a resolution authority or a lead resolution authority. HKMA stands ready, in its capacity as the resolution authority for banking sector entities and the lead resolution authority for the designated cross-sectoral groups involving banking sector entities to provide the Financial Secretary with any support or information that may be needed in making the resolution levy regulations, if and when such a need arises.
Keywords: Asia Pacific, Hong Kong, Banking, FIFO, Resolution, Ex-Post Resolution Levy, Resolution Regime, FSB, HKMA
Previous ArticleEIOPA Publishes Opinion on Sustainability Within Solvency II
Next ArticleIAIS Publishes Newsletter for September 2019
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.