Bail-in or bail-up? : reappraising Hong Kong's proposed financial institution resolution procedures

The recent Global Financial Crisis (GFC) has had a lasting impact on the international financial sector. Emerging around mid-2007, the GFC was triggered by a series of adverse financial events, beginning with the Lehman Brothers bankruptcy, and saw sections of international financial markets come to an almost complete halt, creating fears about the stability of the global financial system. The reactions of governments and central banks around the world was unprecedented in scale and evoked drastic policy responses including, '[s]izeable fiscal stimulus, large reductions in policy interest rates, guarantees of bank deposits and bank debt issuance, and in some cases, sizeable government ownership of troubled financial institutions.' The crisis was so severe that it warranted international governmental coordination and a search for regulatory solutions. Davis writes that, 'The global nature of the crisis has seen an attempt at harmonized global regulatory responses overseen by the G20 and prompting some changes to the structure and responsibilities of international agencies to achieve that outcome.' At a national level, in the US and UK, near insolvent or rapidly failing financial institutions (FIs) were bailed-out by the respective governments, using trillions of taxpayer dollars to avoid a financial meltdown.