Expanded powers sought for regulators
Government will seek law change next year to allow watchdogs to unilaterally take control of troubled financial giants to pre-empt bailouts
The government will seek amendments next year to expand the powers of regulators so that they can unilaterally take control of giant financial firms, including international ones, to pre-empt government bailouts.
The proposal to seek law change, laid out in a consultation paper released yesterday to collect the public's views over the next three months, is aimed to bring Hong Kong in line with the new international rules brought in by the Financial Stability Board formed by the leaders of the Group of 20 developing economies.
Under this new international regime, all major markets are required to empower regulators to handle big financial firms' failures speedily without resorting to taxpayers' money.
"Using public funds to bail out financial firms that are supposedly to be too big to fail is giving their shareholders and creditors a free ride and creates moral hazard," a government source told the South China Morning Post.
"The proposed law change will reduce such risks and establish an effective resolution regime to allow rapid intervention by regulators. It would ensure the shareholders and creditors of the financial firms concerned, rather than the general public, foot the bill."
The source said the new law would also help the local regulators defend customers' interests by blocking any asset transfers out of the city in the event of a crisis in a multinational firm.
The government will have a second consultation over the details of the regulation later this year before a bill is submitted to the Legislative Council for approval next year.