Transcript The Proposed Financial Institution Resolution Regime

Order out of Chaos?
The Proposed
Financial Institution
Resolution Regime
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Introduction
– What is the FIRR and what is it for?
– Who is in-scope?
– What are the conditions for resolution?
– How can a financial institution be “resolved”?
– Why should you care?
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What is the FIRR and what is it for?
– Experiences with failing SIFIs during the GFC
– Alternative to insolvency
– Part of international efforts
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Who is in-scope?
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Authorized
Institutions
Most
Authorized
Insurers
Certain SFCLicensed
Corporations
Financial
Market
Infrastructure
HK-incorporated
Holding
Companies
Affiliated
Companies
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What are the conditions for resolution?
Non-viability condition satisfied?
No
The FI is, or is expected to become, non-viable (including in a
non-financial sense) with no reasonable prospect of recovery.
Yes
Financial stability condition satisfied?
Resolution is required to secure continuity of critical financial
services and protect financial stability.
Yes
FI enters resolution.
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No
FI enters insolvency.
No resolution;
no insolvency.
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How can a financial institution be “resolved”?
Third party transfer
Transfer to “bridge”
institution
- Share transfer or partial or full business transfer to third party.
- Bank/Bank’s business continues under new ownership.
- Partial or full transfer of business to government-owned
“bridge” institution.
- Bank’s business eventually sold off to third party or wound down.
Statutory bail-in
- Write-down of equity and unsecured debt followed by debtfor-equity swap.
- Bank continues as a re-capitalised entity
Temporary public ownership
- Re-capitalisation of Bank using public funds and transfer of
shares to government-owned holding company.
- Bank eventually returned to private sector.
AMV/Liquidation
Liquidity?
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- To deal with the residual parts of the FI.
Safeguards – Philosophical and practical issues
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Effect on financial contracts
Temporary stay of
early termination
rights, acceleration
Segregation of
client assets
Collateralisation
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Why should you care?
– Main practical take-away
– Global cooperation?
– Conclusions?
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HK Resolution Regime – Order out of chaos?
For more information please visit:
http://www.allenovery.com/publications/en-gb/FIRR/Pages/default.aspx
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Contacts
Alan Ewins
Partner
Hong Kong
Tel +852 2974 7151
[email protected]
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Yvonne Siew
Partner
Hong Kong
Tel +852 2974 7271
[email protected]
Richard Woodworth
Consultant
Hong Kong
Tel +852 2974 7208
[email protected]
Questions?
These are presentation slides only. The information within these slides does not
constitute definitive advice and should not be used as the basis for giving definitive
advice without checking the primary sources.
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