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
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.