Hong Kong, which like a number of financial centres wants to work out how to wind up banks and other institutions as painlessly as possible when market crises erupt, is launching the second part of a consultation programme, lasting three months.

Hong Kong, which like a number of financial centres wants to work out how to wind up banks and other institutions as painlessly as possible when market crises erupt, is launching the second part of a consultation programme on the subject, lasting three months.

Regulators such as the Hong Kong Monetary Authority, Securities and Futures Commission, and Insurance Authority have with the government launched a public consultation on an “effective resolution regime”. The first part of the consultation took place in early 2014.

Policymakers around the world have considered ideas such as splitting up banks, creating bank “living wills” and other measures to limit the financial fallout of future crashes, mindful of how firms such as Royal Bank of Scotland, AIG, UBS and ING had to be bailed out by taxpayers in various countries. At the core of the issue is the worry that some banks, for example, are “too big to fail”, creating the danger that their managers, expecting bailouts, will take undue risks.

“The second stage of consultation launched today seeks views on specific aspects of the regime including: further details on the resolution options and powers proposed in the first consultation paper; the governance arrangements and especially the approach to designating resolution authorities; as well as safeguards including a ‘no creditor worse off than in liquidation’ compensation mechanism,” a spokesperson for Hong Kong’s government said in a statement issued by the HKMA.

Legislation is required to create a resolution regime in Hong Kong, the HKMA said.

The consultation runs until 20 April.