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62.4748

Resolution Execution

Under the Financial Institutions (Resolution) Ordinance (FIRO), the orderly resolution of an financial institution (FI) may be achieved by deploying one or more of the stabilization options available under the FIRO. These are: (i) transfer of a failing FI or some or all of its business to a purchaser; (ii) transfer of a failing FI or some or all of its business to a bridge institution; (iii) transfer of failing FI's assets, right and liabilities to an asset management vehicle; (iv) bail-in (i.e. a statutory write-off or conversion into equity of certain liabilities of a failing FI, in order to absorb losses and restore its capital position); and as a last resort; (v) transfer of a failing FI to a temporary public ownership company. As shown in the chart below, there are three broad stages of a resolution transaction in applying any of the stabilization options.

Stylised example of stages of a resolution transaction
 
Work is being undertaken to strengthen the Monetary Authority’s operational readiness for executing resolution transactions. In particular this will involve enhancing cross-border arrangements for cooperation with non-Hong Kong authorities in resolution planning and resolution execution, and further developing the operational capability with respect to the use of the resolution powers.

The Monetary Authority expects to develop and publish in due course its approach to resolution execution, such as the mechanics of a bail-in execution.

Last revision date: 7 July 2017
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