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Hong Kong Consults On Bank Resolution Regime

by Mary Swire, LawAndTax.News.com, Hong Kong
09 January, 2014

On January 7, Hong Kong's Government and financial regulators – the Hong Kong Monetary Authority, the Securities and Futures Commission and the Insurance Authority – launched the first stage of a three-month public consultation on establishing an effective resolution regime for financial institutions.

They noted that the establishing of an effective resolution regime is required to meet the latest international standards for financial institutions' regulation and supervision, as it would provide Hong Kong's authorities with powers to resolve non-viable financial institutions without severe systemic disruption, while also protecting taxpayers.

Tasked by the Group of Twenty leaders to develop measures to address the systemic and moral hazard risks posed by the failure of systemically important and "too-big-to-fail" financial institutions, the Financial Stability Board (FSB) issued the "Key Attributes of Effective Resolution Regimes for Financial Institutions" (Key Attributes) in November 2011.

As a member jurisdiction of the FSB, and a major international financial center, it is incumbent upon Hong Kong to meet the new standards set out in the Key Attributes concerning scope, governance arrangements, resolution powers and options, safeguards, funding, cross-border co-operation and information sharing. However, in drawing up the proposals, the Government and regulators confirmed that they have also considered local circumstances.

It was disclosed that all comments received would be analyzed to develop proposals for the second-stage consultation later this year. The Government hopes to introduce legislative proposals next year.

The deadline for written comments on the resolution regime consultation to the Financial Services Branch of Financial Services & the Treasury Bureau is April 6, 2014.

A comprehensive report in our Intelligence Report series, analysing the situation on the ground in each of the main offshore banking centres, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report3.asp

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