Hong Kong Central Bank HKMA on Banks Capital Instruments Including Additional Tier 1: Shareholders are the First to Absorb Losses Followed by Holders of AT1 & AT2 Capital
25th March 2023 | Hong Kong
Hong Kong central bank HKMA (Hong Kong Monetary Authority) has issued a statement on Hong Kong banks capital instruments including Additional Tier 1 (AT1), citing a clear order in which shareholders and creditors would bear losses in a resolution scenario and shareholders are the first to absorb losses followed by holders of AT1 & AT2 capital. HKMA: The Financial Institutions (Resolution) Ordinance establishes the legal basis for the resolution regime in Hong Kong. Under the Ordinance, there is a clear order in which shareholders and creditors would bear losses in a resolution scenario. 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.” See full statement below.
“ Hong Kong Central Bank HKMA on Banks Capital Instruments Including Additional Tier 1: Shareholders are the First to Absorb Losses Followed by Holders of AT1 & AT2 Capital “
Hong Kong Central Bank HKMA on Banks Capital Instruments Including Additional Tier 1
22nd March 2023 – In response to media enquiries regarding creditor hierarchy, the Hong Kong Monetary Authority has the following responses:
- The Financial Institutions (Resolution) Ordinance establishes the legal basis for the resolution regime in Hong Kong. Under the Ordinance, there is a clear order in which shareholders and creditors would bear losses in a resolution scenario.
- 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.
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