HKMA’s response to media enquiries

In response to several enquiries and to the recent resolution of several U.S. financial institutions, the Hong Kong Monetary Authority (HKMA) has issued a press statement to clarify the order by which creditors and shareholders are reimbursed in case of the unsolvency and wind-down of financial institutions.
The HKMA thereby notes that the „order in which shareholders and creditors would bear losses in a resolution scenario“ is clearly determined in the Financial Institutions (Resolution) Ordinance. Thereafter, „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“.