The Government published in the Gazette today (May 12) the Financial Institutions (Resolution) Ordinance (Commencement) Notice (the Commencement Notice) and the Financial Institutions (Resolution) (Protected Arrangements) Regulation (the Regulation).
Enacted in June 2016, the Financial Institutions (Resolution) Ordinance (Cap. 628) (the Ordinance) establishes a cross-sector resolution regime for within scope financial institutions (FIs) that is designed to meet international standards set by the Financial Stability Board, namely the “Key Attributes of Effective Resolution Regimes for Financial Institutions”.
To bring the Ordinance into operation, the Secretary for Financial Services and the Treasury made the Commencement Notice to appoint July 7, 2017 as its commencement date.
The Regulation, which will come into effect on the same day, imposes appropriate constraints on the resolution authorities under the Ordinance, namely the Monetary Authority, the Insurance Authority and the Securities and Futures Commission, in the event that it is necessary for them to exercise resolution powers to manage the orderly failure of a non-viable systemically important FI in Hong Kong. These constraints are designed to safeguard the economic effect of a certain set of financial arrangements, defined as “protected arrangements” under section 74 of the Ordinance, that are crucial to the daily functioning of financial markets. Before the Ordinance commences operation, it is considered prudent to have the Regulation in place in order to provide legal certainty on the treatment of the “protected arrangements” if a resolution authority should need to exercise its resolution powers.
“We conducted a two-month public consultation on the approach to the Regulation and are pleased to note that the respondents generally agreed with our proposals. The commencement of the Ordinance and the Regulation will confer necessary powers and responsibilities on the resolution authorities to mitigate the risks posed by systemically important failing FIs, at home or abroad, thereby strengthening the resilience of the financial system in Hong Kong while enhancing its premier position as an international financial centre,” a Government spokesman said.
The Commencement Notice and the Regulation will be tabled before the Legislative Council at its sitting on May 17, 2017 for negative vetting. The Commencement Notice and the Regulation will come into operation on July 7, 2017.