HKMA released the consultation conclusion on the public consultation related to rules prescribing loss-absorbing capacity (LAC) requirements for authorized institutions. The rules were proposed to be made as subsidiary legislation under section 19(1) of the Financial Institutions (Resolution) Ordinance (Cap. 628).
The core of the HKMA’s LAC policy proposal is that authorized institutions whose failure could pose a risk to the financial system in Hong Kong should be required to have sufficient LAC to facilitate the orderly failure of such entities, should they reach the point of non-viability. To this end, requiring authorized institutions to maintain sufficient LAC is a pre-requisite to enabling the Monetary Authority, as resolution authority for the banking sector, to use the powers under the resolution regime established by the Ordinance 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.
At the end of the consultation period (January 17, 2018 to March 16, 2018), 10 submissions had been received, including from industry associations (both domestic and international), authorized institutions, and financial market infrastructures. Respondents provided constructive comments on the proposals set out in the consultation paper. While some sought additional clarity on the details of the proposals, no respondents challenged the basic principle of the policy proposal. HKMA has carefully reviewed all comments and its responses are set out in the consultation conclusion, with appropriate changes adopted in developing the draft rules. The intention is to consult industry on the text of the draft rules before introducing the rules as subsidiary legislation under the Ordinance into the Legislative Council for negative vetting later in 2018. 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.
Keywords: Asia Pacific, Hong Kong, Banking, Loss Absorbing Capacity, Resolution Regime, Consultation Conclusions, HKMA
Previous ArticleCentral Bank of Ireland Increases CCyB Rate on Irish Exposures
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.
FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.
ECB published eleventh issue of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy.
HM Treasury issued a call for evidence seeking views to reform the prudential regulatory regime—also known as Solvency II—of the insurance sector in UK.
ESRB responded to the EC consultation on review of Solvency II regime.
HM Treasury launched a consultation on Phase II of the Future Regulatory Framework Review, with the comment period ending on January 19, 2021.