The Hong Kong government, along with the territory's three major financial regulators, released a final report on Thursday, 6 April following a public consultation on the local protected arrangements regulation. The aim now is to make the consultation conclusion subsidiary legislation under s. 75 of the Financial Institutions (Resolution) Ordinance (Cap. 628). The document has been posted to the website of the Financial Services Branch of the Financial Services and the Treasury Bureau, as well as those of the Hong Kong Monetary Authority, the Securities and Futures Commission and the Insurance Authority.
The consultation conclusion sets out the authorities' response to comments received and the proposals for taking the regulation forward.
"We are pleased to note that the respondents generally agreed with the approach to the regulation proposed in the consultation paper while providing constructive and technical comments. We have carefully reviewed respondents' suggestions and adopted them as appropriate in refining the regulation to enhance its efficacy," a government spokesman said.
The consultation period, which ran from 22 November 2016 to 21 January 2017, saw the authorities receive a total of 11 submissions from professional bodies, industry associations and financial market infrastructure providers. The regulation imposes appropriate constraints on the resolution authorities ("RA") under the Ordinance, namely the HKMA, SFC and IA, in the event that it is necessary to exercise their resolution powers to manage the orderly failure of a non-viable systemically important financial institution in the city.
Such constraints are designed to safeguard the economic effect of a set of financial arrangements – defined as "protected arrangements" under s. 74 of the Ordinance – that are crucial to the regular functioning of local financial markets.
Before the Ordinance becomes effective, therefore, it would be prudent to have the regulation in place in order to provide legal certainty on the treatment of the "protected arrangements" if an RA were to exercise its resolution powers, a statement posted to the HKMA's website yesterday said.
"Our current plan is to table the regulation before the Legislative Council in Q2 2017, with a view to bringing the regulation and the Ordinance into operation shortly after the completion of the negative vetting procedure within 2017," it said.