HKMA Article Examines Public Money Recovery Arrangements Under FIRO
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
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