Key Information

inSight
Speeches
Speeches by Speaker
Norman T.L. Chan
Peter Pang
Eddie Yue
Arthur Yuen
Zeti Akhtar Aziz
Raymond Li
Edmond Lau
Esmond Lee
Meena Datwani
Vincent W.S. Lee
James Lau
Joseph Yam
Y K Choi
William Ryback
David Carse
Tony Latter
Andrew Sheng
Hans Genberg
Simon Topping
Michael Taylor
The Honourable Donald Tsang
Chen Yuan
Dai Xianglong
Don Brash
Jaime Caruana
Andrew Crockett
Mario Draghi
David Eldon
Stanley Fischer
Timothy F. Geithner
Stephen Grenville
Kenneth G. Lay
William McDonough
Ernest Patrikis
Glenn Stevens
Jean-Claude Trichet
Tarisa Watanagase
Zeti Akhtar Aziz
Carmen Chu
Alan Au
Press Releases
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Press Releases by Category
Bogus Voice Message Phone Calls
Banking in Hong Kong
Fraudulent Websites, E-mails and Telephone System, and other fraud cases
Granting of Banking Licences
Exchange Fund
Table of Multiples of Notes and Payments for Allotted Amount under non-competitive tender
Table of Multiples of Notes and Payments of Application Amount under non-competitive tender
Tender of Exchange Fund Bills and Notes
Tender Results of Exchange Fund Bills and Notes
Tentative Issuance Schedule for Exchange Fund Bills and Notes
Appointments and Departures
HKMA Pay Review
HKMA Publications
Speeches
The Hong Kong Mortgage Corporation
Hong Kong Note Printing Limited
Hong Kong Institute for Monetary Research
Exchange Fund Investment Limited
Others
Hong Kong Financial Infrastructure
International Relations
Investment Products Related to Lehman Brothers
Monetary Policy
Notes and Coins
Renminbi business
Credit Card Lending Survey
Monetary Statistics
Residential Mortgage Survey
Year 2000
Others
Guidelines and Circulars
Guidelines
Circulars
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
515.5995

Press Releases

The Lender of Last Resort*

The Hong Kong Monetary Authority (HKMA) will soon be issuing a detailed policy statement on the HKMA's role as lender of last resort to all authorised institutions in Hong Kong, according to the Chief Executive Mr Joseph Yam.

Mr Yam was speaking at the Hong Kong Association of Banks' Half-Yearly Dinner in Hong Kong today (29 June).

The detailed policy statement will address the HKMA's role as lender of last resort, which involves the provision of support to banks that are basically solvent but are troubled by short-term funding difficulties. This function is to be distinguished from the provision of intra-day liquidity under the Real Time Gross Settlement System and overnight liquidity through the Discount Window. It is also distinct from the provision of longer-term liquidity or capital support to a probably insolvent bank.

Mr Yam said that the HKMA had acted as Hong Kong's official lender of last resort since its establishment in 1993, although it had never had to exercise that function.

The Banking Sector Consultancy Study commissioned by the HKMA last year found that a large number of participants in the banking sector were either unaware that there was actually a lender of last resort or were unclear as to the conditions under which the HKMA would provide such assistance.

"There are strong justifications for the HKMA not only to restate the principles under which we are ready to provide liquidity support to institutions experiencing difficulties, but also to further clarify the objectives, the mechanics and the limits of this support," said Mr Yam.

"A greater knowledge and awareness of the availability of a lender of last resort facility will, we hope, further help to reduce uncertainty, and will in turn help to improve overall market liquidity in the event of future crises, should they arise," he added.

Mr Yam said that a formalised policy framework would also help the HKMA itself to ensure speed and consistency in considering whether or not to extend lender of last resort support.

The resources for providing lender of last resort support would be drawn from the Exchange Fund in accordance with the Exchange Fund Ordinance. The HKMA's exercise of lender of last resort support would also be consistent with the Currency Board arrangements in Hong Kong.

The basic precondition for obtaining support was the systemic risk that would arise from the failure of a troubled institution if it were deprived of liquidity assistance.

"The guiding principle in considering whether to provide lender of last resort support to an individual authorised institution is whether the failure of that institution, either by itself or through spreading contagion to other institutions, would damage the stability of the exchange rate or the monetary and financial systems," Mr Yam said.

In addition to this basic precondition, a number of other preconditions would need to be satisfied by an institution seeking support. These included : a sufficient margin of solvency, adequate collateralisation, and a demonstration that the institution had already sought other reasonably available source of funding.

The HKMA would use three basic instruments to provide support: purchase of the institution's placements with other banks; repos of eligible Hong Kong dollar securities; and a credit facility against the security of the institution's residential mortgage portfolio.

"We believe that the provision of these details will go a long way towards removing market uncertainty and improving market liquidity, especially in times of crisis," he said.

Hong Kong Monetary Authority
29 June 99

*The LOLR policy statement has been amended in March 2009.  Please refer to the press release "HKMA to continue the provision of liquidity assistance to banks" issued on 26 March 2009.

Last revision date: 2 August 2011
ABOUT THE HKMA
The HKMA
Tender Invitations
Careers@HKMA
Legislative Council Issues
Links
The HKMA Information Centre
KEY FUNCTIONS
Monetary Stability
Banking Stability
International Financial Centre
Exchange Fund
PUBLICATIONS & RESEARCH
Annual Report
Half-Yearly Monetary & Financial Stability Report
Quarterly Bulletin
HKMA Background Briefs
Reference Materials
Research
MARKET DATA & STATISTICS
CMU Bond Price Bulletin
Economic & Financial Data for Hong Kong
Monthly Statistical Bulletin
Monetary Statistics
KEY INFORMATION
Press Releases
Speeches
Guidelines & Circulars
Forthcoming Events
inSight
OTHER INFORMATION
Information in Other Languages (Bahasa Indonesia, हिन्दी, नेपाली, ਪੰਜਾਬੀ, Tagalog, ไทย, اردو)
Account Opening
Consumer Corner
Consumer Education Programme
Complaints about Banks
Complaints about SVF Licensees
Internet Banking
Fraudulent Bank Websites, Phishing E-mails and Similar Scams
Be Careful of Bogus Phone Calls and SMS Messages
Authenticate the Callers and Bank Hotline Numbers
Register of AIs & LROs
Register of Securities Staff of AIs
Register of SVF Licensees
Investment Products Related to Lehman Brothers
Photo Gallery