Consumer Council Submission on the Second Consultation Paper for an Effective Resolution Regime for Financial Institutions in Hong Kong

20 April 2015
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1. The Consumer Council is pleased to submit its views regarding the second consultation paper jointly issued by the Financial Services and the Treasury Bureau (FSTB), the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC) and the Insurance Authority (IA), on proposals for establishing an effective resolution regime for financial institutions (FIs) in Hong Kong. 

2. In the following paragraphs, the Council provides views on the specific issues raised in the second consultation paper which includes the scope, governance arrangements, safeguards and funding of the resolution regime. 

Scope of the Resolution Regime 

3. As in its response to the first consultation paper [1], the Council suggested that in the face of considerable diversity and uncertainty across types of FIs and economic circumstances over time, a review mechanism should be introduced to add/delete FIs from the scope of the regime. 

4. The Council therefore welcomes the proposal in the second consultation paper that the Financial Secretary (FS) be provided with a power to designate FIs (not initially covered by the regime) as being within scope where it is considered that systemic disruption could result were they to become non-viable.

5. To ensure that all FIs which could be critical or systemic on failure are within scope of regime, the Council suggests that FS or its designate, should review and monitor the scope of the regime on a regular and ongoing basis. The Council also considers that making disclosure of any change in the scope, albeit on an aggregate basis, would enhance public confidence in the resolution regime. 

Governance Arrangements 

6. In its previous submission, the Council supported the setting up of a common framework for resolution through a single regime. The Council is glad to note in the second consultation paper that a single resolution regime will be established for FIs in different sectors of the financial system. 

7. Notwithstanding it is proposed that HKMA, SFC and IA will be designated as the resolution authority for 'in scope' FIs operating under their respective purviews, the Council still considers it important to have a lead resolution authority to coordinate the resolution of different FIs operating within a cross-sector group. 

8. In this regard, the Council understands that a lead resolution authority will be designated by FS, the higher authority, in advance based on an assessment of the relative systemic importance. The Council supports the proposal and reiterates the importance of efficiency and consistency in securing the resolution objectives. 

9. Apart from the three resolution objectives proposed in the consultation paper, the Council shares the view of some respondents that additional resolution objective in respect of the protection of client assets should be included in the regime. 

Safeguards and Funding 

10. The Council supports the proposed establishment of the Resolution Compensation Tribunal (RCT) and the provision of the right to appeal against a determination of the RCT under the regime. 

11. Regarding the resolution funding arrangements, the Council is of the view that any resolution costs should be included in the resolution package to be considered by the lead resolution authority.


1.  Please refer to for CC's Submission on Proposals for a Resolution Regime for Financial Institutions in Hong Kong, April 16, 2014.