In response to the issues concerning difficulties encountered by some small and medium-sized enterprises (SMEs) when opening bank accounts and obtaining bank loans, the HKMA has taken a series of follow-up actions and actively communicated with banks, the business community and industry associations. In this inSight article, I would like to report the latest progress of our work in this regard.
Let me start with the account opening issue. Since the HKMA learnt from various sources about the difficulties experienced by the SMEs and start-ups in opening bank accounts, we approached several large retail banks in Hong Kong in April this year to understand the situation regarding their handling of account opening applications. Thereafter, we also met with some chambers of commerce and industry associations to obtain further understanding of the specific difficulties they encountered in opening bank accounts. Based on the information we have gathered, we note that in some cases the approach adopted by banks was not proportionate to the risk level of the customers and not in line with the spirit of financial inclusion. There is a need to address the issue and improve the situation. At the same time, we have approached banks to understand their account opening and customer due diligence (CDD) processes with a view to exploring room for improvement.
The HKMA will issue a circular to banks shortly to elaborate on how the “risk-based approach” can be applied to account-opening procedures and CDD measures for existing customers. We expect banks, after receiving the circular, will review their existing measures and adjust them where appropriate for achieving financial inclusion.
As for the issue of difficulties in obtaining bank loans by the SMEs, the HKMA also began with gathering information to get a grasp of the latest situation with a view to addressing the issue in a targeted manner. According to the information we have gathered from banks active in the SME lending business, we find that banks have not reduced their risk appetite or tightened their underwriting standards for SME lending. Neither was there significant change in the total credit facility limits granted to the SMEs by these banks in the first half of the year. Some banks indicated to us that loan demand from the SMEs had weakened as some enterprises had become more cautious about business prospects in light of the uncertain economic outlook.
Is what we heard from the banks reflecting the actual situation of SME financing? In order to better understand the actual situation, the HKMA has commissioned the Hong Kong Productivity Council to conduct a survey with the SMEs. Allow us to report the findings later after we have collected and analysed more data.
Nevertheless, no matter what the survey results will be, it is beyond doubt that the SMEs make significant contributions to the local economy. The HKMA has all along been encouraging banks to provide support to the SMEs as far as possible under their own credit policies. Earlier on, we noticed that some banks and SMEs had some misunderstanding about the SME Financing Guarantee Scheme operated by the Hong Kong Mortgage Corporation Limited (HKMC) on behalf of the Government. We therefore took the initiative to approach the chambers of commerce and banks to enhance their understanding of the scheme, and we have received positive feedback. The HKMC will continue their promotional efforts and encourage enterprises and banks to make good use of the scheme, which has a remaining guarantee commitment of over HK$60 billion. I believe that banks should aim at establishing a long-term and mutually-supportive relationship with their customers, and should not shy away from them due to short-term economic fluctuations.
In fact, a major local retail bank has been actively expanding its SME business recently, “upgrading” its retail branches to provide more comprehensive services. In the past, SMEs could only open bank accounts at some branches. They can now go to any branches to open accounts. I visited one of the branches today and had a chat with their SME customer there to understand the business situation.
In addition, this bank has introduced video teller machines that offer services 24 hours a day and 7 days a week, covering applications for credit cards, personal loans, mortgages, travel insurances, etc. While I guess not many people may use these services in the middle of the night, I really appreciate the bank’s efforts in putting the spirit of financial inclusion into practice by expanding the coverage of its network and extending the operating hours to bring more convenience to the public. I hope that the banking industry will introduce more new measures going forward to benefit the community at large.
Mr Norman Chan, Chief Executive of the HKMA (second from the right) and Mr Raymond Li, Chief Executive Officer of the Hong Kong Mortgage Corporation (first from the left) learn from Mr Yue Yi (first from the right), Vice Chairman and Chief Executive of the Bank of China (Hong Kong) Limited (BOCHK) about the expansion of the coverage of SME services offered by the bank, and chat with a SME customer (second from the left) to understand the latest situation concerning the operations and financing of SMEs.
Mr Yue Yi, Vice Chairman and Chief Executive of the BOCHK (left) introduces the bank’s newly launched video teller machine services to Mr Norman Chan, Chief Executive of the HKMA (right).
Hong Kong Monetary Authority
5 September 2016
Financial inclusion series – fourth article
To review other articles in the series: