Hong Kong has sent its strongest message yet on
too-big-to-fail financial institutions by entrusting its
banking regulator with new bail-in powers. But their
misinterpretation has cause widespread concern.
On July 7 the former British colony became first Asian
jurisdiction to introduce a revised resolution regime,
designating the Hong Kong Monetary Authority (HKMA), the
Insurance Authority and the Securities and Futures Commission
(SFC) as resolution authorities. Under the new regime, the
HKMA, the territory’s de facto central bank, now
has powers to bail in certain additional bank liabilities
after additional tier 1 (AT1) and tier 2 bank capital
instruments have been written down or converted.
However, confusion of the interpretation of the protective
arrangements embedded in the new regime, which is structured to
ensure bank counterparties and creditors are treated fairly,
has been reported.
"I’ve seen a notion in some press reports that
somehow bail-in means...