牌照 · 2026-01-23

HKMA Recovery and Resolution Plans for Banks: Requirements for Systemically Important Institutions

The Hong Kong Monetary Authority (HKMA) has sharpened its focus on resolvability for systemically important banks. A key driver is the Financial Stability Board’s (FSB) 2024 peer review of Hong Kong’s resolution regime, which recommended more granular testing of recovery and resolution plans (RRPs) for the city’s eight Domestic Systemically Important Banks (D-SIBs). With the HKMA’s updated Supervisory Policy Manual (SPM) module CA-G-1 on “Recovery Planning” effective from January 2025, and the finalisation of the Banking (Resolution) (Contractual Recognition of Suspension of Termination Rights) Rules (Cap. 155, Sub. Leg. BN) in 2024, the compliance bar has materially risen. For banks operating in Hong Kong that meet the systemic importance thresholds, the requirement is no longer to simply file a plan. The HKMA now expects demonstrable capability to execute that plan under stress, with all critical cross-border group entities mapped and tested. This article sets out the current regulatory framework, the specific HKMA requirements for D-SIBs and other systemically important institutions, and the practical steps compliance officers must take ahead of the next supervisory cycle.

The Legal and Regulatory Framework for Bank Recovery and Resolution in Hong Kong

The HKMA’s powers to require and assess recovery and resolution plans derive primarily from the Banking Ordinance (Cap. 155) and the Banking (Resolution) Ordinance (Cap. 155, Sub. Leg. CN) (the Resolution Ordinance). The Resolution Ordinance, which came into full force on 7 July 2022, implements the FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions. It grants the HKMA (as the resolution authority) a statutory mandate to prepare resolution plans for all authorised institutions (AIs) and to require AIs to prepare and maintain their own recovery plans.

The Supervisory Policy Manual (SPM) Module CA-G-1

The primary operational guidance is the HKMA’s SPM module CA-G-1: Recovery Planning, revised in December 2024 and effective for all AIs from 1 January 2025. The module sets out the minimum standards for recovery plan content, governance, and testing.

Scope: The module applies to all AIs, but the depth of requirements is calibrated to the institution’s size, complexity, and systemic importance. Category 1 institutions (generally those with assets of HK$30 billion or more) and all D-SIBs must comply with the full set of requirements.
Core Content: Each recovery plan must identify a range of credible recovery options, including capital raising, asset sales, liability management, and balance sheet restructuring. For each option, the plan must specify the trigger events, the legal and operational feasibility, the estimated impact on capital and liquidity ratios, and the expected time to execution.
Governance: The board of directors must approve the recovery plan annually. Senior management must designate a “recovery plan owner” responsible for maintaining the plan and conducting annual self-assessments. The HKMA expects the board to receive a standalone report on recovery planning, separate from general risk committee minutes.

The Resolution Ordinance (Cap. 155, Sub. Leg. CN)

The Resolution Ordinance provides the HKMA with five statutory resolution tools: sale of business, bridge institution, asset separation, bail-in, and temporary public ownership. For systemically important institutions, the HKMA’s resolution plan will typically assume the use of the bail-in tool for the holding company, with a sale of business for the Hong Kong operating entity.

Contractual Recognition of Stay Powers: The Banking (Resolution) (Contractual Recognition of Suspension of Termination Rights) Rules (Cap. 155, Sub. Leg. BN) require all AIs to include contractual terms in their financial contracts governed by non-Hong Kong law. These terms must recognise the HKMA’s power to temporarily suspend termination rights during a resolution process. The deadline for compliance for new contracts was 7 July 2023, and for existing contracts, 7 July 2024.
Resolution Group Structure: The Ordinance requires each AI to map its legal entity structure and identify all critical functions and shared services. The HKMA’s 2024 resolution planning guidance, issued via a circular on 15 March 2024, specifically requires D-SIBs to provide a “resolution group” analysis that shows how the Hong Kong entity would be separated from the rest of the group in a resolution scenario.

Specific Requirements for Systemically Important Institutions

The HKMA designates D-SIBs annually based on a scorecard methodology that assesses size, interconnectedness, substitutability, and complexity. As of the HKMA’s 2024 annual review, eight banks are designated as D-SIBs, including the Hong Kong operations of HSBC, Standard Chartered, Bank of China (Hong Kong), and Hang Seng Bank. These institutions face heightened expectations.

Recovery Plan Stress Testing and Scenario Analysis

For D-SIBs, the HKMA requires recovery plans to be stress-tested against at least two severe but plausible scenarios: a systemic financial crisis and an idiosyncratic shock specific to the institution.

Quantitative Thresholds: The HKMA has set specific quantitative indicators that must be included in the recovery plan. These include the Common Equity Tier 1 (CET1) ratio, the Leverage Ratio, the Liquidity Coverage Ratio (LCR), and the Net Stable Funding Ratio (NSFR). The plan must define the “recovery trigger” for each indicator—the level at which management would activate a specific recovery option. For D-SIBs, the HKMA expects trigger levels to be set above the regulatory minimums, typically at a CET1 ratio of 10.5% or higher, compared to the minimum of 4.5% plus the D-SIB buffer (which ranges from 1.0% to 2.5%).
Annual Testing: The HKMA conducts an annual “desktop exercise” for each D-SIB, where the bank must demonstrate within a 48-hour window that it can produce key data points required for resolution. The 2024 exercise, described in the HKMA’s Annual Report 2024, focused on the availability of collateral and the identification of critical service providers. A bank that fails to produce the required data within the timeframe is required to submit a remediation plan within 30 days.

Resolution Planning: The “Living Will” Requirement

The HKMA’s resolution planning framework for D-SIBs is modelled on the FSB’s “Total Loss-Absorbing Capacity” (TLAC) standard, although Hong Kong has not formally adopted a TLAC requirement for its D-SIBs. Instead, the HKMA relies on the bail-in powers under the Resolution Ordinance.

Minimum Requirement for Own Funds and Eligible Liabilities (MREL): The HKMA has issued guidance on MREL for D-SIBs. The requirement is set on a case-by-case basis, but the HKMA’s Resolution Planning Guideline (March 2024) indicates that the MREL will generally be set at a level sufficient to absorb losses and recapitalise the entity, typically equivalent to at least 200% of the bank’s capital requirement, including buffers.
Critical Functions Analysis: Each D-SIB must identify which of its functions are “critical” to the Hong Kong financial system. The HKMA’s 2024 circular on “Critical Functions in Resolution” (HKMA Circular, 22 November 2024) defines a critical function as one where the failure of the function would cause a material disruption to the economy or financial stability. For most D-SIBs, retail deposit-taking, payment and settlement systems, and wholesale lending to large corporates are classified as critical. The bank must demonstrate that these functions can continue uninterrupted during resolution.

Practical Compliance Steps and Timelines for 2025-2026

For compliance officers and legal teams at AIs that are, or may become, systemically important, the 2025-2026 supervisory cycle requires a structured approach. The HKMA has signalled that it will increase the frequency of its on-site examinations of recovery and resolution capabilities.

Step 1: Review and Update the Recovery Plan

The first deadline is the annual board approval of the recovery plan, which must occur before 30 June 2025 for plans covering the 2025-2026 financial year.

Action: Compare the existing plan against the revised CA-G-1 module. Ensure that all recovery options include a legal feasibility assessment, including an opinion from external Hong Kong counsel on the enforceability of asset transfers and contract modifications.
Trigger Calibration: Re-calculate the recovery triggers based on the bank’s current capital and liquidity positions. The HKMA expects triggers to be forward-looking, not just based on historical breaches. For example, if the bank’s CET1 ratio is 12%, a trigger set at 10.5% may be considered too close to the minimum. A more prudent trigger would be 11.5%.

Step 2: Complete the Resolution Group Mapping

By 31 December 2025, the HKMA expects all D-SIBs to have completed a full resolution group mapping exercise, identifying all legal entities, branches, and subsidiaries that would be included in a Hong Kong resolution.

Action: Use the HKMA’s template (available in the March 2024 circular) to map each entity’s function, the governing law of its contracts, and its reliance on shared services (e.g., IT, HR, treasury). Identify any contractual clauses that could impede resolution, such as cross-default clauses in derivative contracts that are not covered by the contractual recognition rules.
Gap Analysis: Where cross-default clauses remain in contracts governed by non-Hong Kong law and entered into before 7 July 2023, the bank must either renegotiate the contract or, if renegotiation is not possible, submit a waiver application to the HKMA under section 18 of the Resolution Ordinance. The HKMA’s policy is to grant waivers only where the bank can demonstrate that the clause does not pose a material impediment to resolution.

Step 3: Prepare for the 2026 Desktop Exercise

The HKMA’s 2026 desktop exercise for D-SIBs is expected to focus on the execution of the bail-in tool.

Action: Develop a “bail-in playbook” that specifies, for each class of eligible liability, the legal steps required to convert the liability into equity. This includes identifying the relevant provisions in the bank’s articles of association, the applicable listing rules (if the bank is listed on the Stock Exchange of Hong Kong), and the notice periods required under the Resolution Ordinance.
Data Readiness: Ensure that the bank’s data systems can produce, within 24 hours, a list of all eligible liabilities, their governing law, their maturity dates, and the identity of the holders. The HKMA’s 2024 exercise revealed that two out of eight D-SIBs could not produce this data within the required timeframe.

Closing Takeaways

Three actionable priorities emerge for compliance teams preparing for the 2025-2026 supervisory cycle.

Update the recovery plan by 30 June 2025 to comply with the revised CA-G-1 module, ensuring that all recovery options include a legal feasibility opinion from Hong Kong-qualified counsel.
Complete the resolution group mapping by 31 December 2025, using the HKMA’s March 2024 template, and identify and remediate any cross-default clauses that are not covered by the contractual recognition rules.
Develop a bail-in playbook that specifies the legal and operational steps for converting eligible liabilities into equity, and ensure that data systems can produce a complete liability inventory within 24 hours for the 2026 desktop exercise.

Disclaimer: This article provides general information on regulatory requirements and does not constitute legal advice. The specific obligations of an authorised institution depend on its size, complexity, and designation status. Institutions should consult their legal advisors and the HKMA for guidance tailored to their circumstances.