In response to media enquiries regarding creditor hierarchy, the Hong Kong Monetary Authority has the following responses:
- The Financial Institutions (Resolution) Ordinance establishes the legal basis for the resolution regime in Hong Kong. Under the Ordinance, there is a clear order in which shareholders and creditors would bear losses in a resolution scenario.
- Holders of capital instruments (including core equity capital, Additional Tier 1 (AT1) capital and Tier 2 capital) issued by a financial institution should expect to be treated in resolution in accordance with the priority they would enjoy on a winding up of the institution. Accordingly, shareholders are the first ones to absorb losses, followed by holders of AT1 and Tier 2 capital instruments.
Hong Kong Monetary Authority
22 March 2023