Two-fold increase of HSI since 2008 global financial crisis.

Two-fold increase of HSI since 2008 global financial crisis.

Hong Kong keeps pace with financial reformation set by G20 nations after 07/08 global financial crisis

However, several Asian nations, including mainland China, India and South Korea were making slow progress implementing reforms on regulations of financial institutes for endings the ‘too big to fail’ problem.

Hong Kong opened a second round of public consultation on the introduction of sweeping new powers that aim to protect taxpayers from big financial firm collapses, marking an important step toward ending “too big to fail.”

The proposals, outlined in a government consultation paper published yesterday, reflect the SAR’s commitment to implement a reform agenda set by G20 nations in the wake of the 2008 global financial crisis.

Hong Kong’s insolvency laws could be changed dramatically, and financial regulators would be given increased powers if the proposals are adopted.

Responses to the paper must be submitted by April 20, while the government expects to table legislation by the fourth quarter.

After Lehman Brothers collapsed in 2008, governments in the United States and Europe spent more than US$1.7 trillion (HK$13.26 trillion) bailing out failing financial firms, fearing their collapse would trigger a global meltdown.

A year later, countries pledged to introduce laws to empower governments to let such firms go bust while maintaining critical functions such as ATM payments. These so-called “resolution” powers would also allow governments to take a range of drastic measures from replacing the firm’s management and hiving off assets, to bailing-in local bondholders.

Hong Kong issued its first consultation paper a year ago.

Due to the complexity and scale of the proposals, the government has opened a second consultation.

Legislating resolution powers is critical if Hong Kong is to maintain its status as a global financial center, lawyers said. The SAR hosts 38 of the world’s largest and most systemically important financial firms.

Source: The Standard Finance

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