The Hong Kong Banking Sector's Exposure to ITICs (excluding GITIC) and their Subsidiaries

Following the closure of GITIC by the Chinese authorities, there have been concerns about the banking sector's exposure to other ITICs.

According to the latest figures available to the Hong Kong Monetary Authority (HKMA), the total direct exposure of the Hong Kong banking sector to ITICs (excluding GITIC) and their subsidiaries is around HK$30 billion. This represents a relatively small percentage of the total loans of the banking sector (0.9%). In addition, there are about HK$14 billion of contingent liabilities to the ITICs, mainly covering guarantees, letters of credit, undrawn commitments, and other contingent liabilities incurred on behalf of the borrowers. It should be noted that there could be double counting in the amount of direct exposure and contingent liabilities where ITICs have issued guarantees to the banks to support the banks' lending to their subsidiaries. But the HKMA does not have information on the amount of such guarantees involved.

The total exposure is spread among 128 authorized institutions, including both local and foreign institutions. Individual institutions do not appear to be over-exposed.

Around 37% of the direct exposure (about HK$11 billion) is to the ITICs in Mainland China. Most of these debts are registered with SAFE. The remainder of the direct exposure (about HK$19 billion) and most of the contingent liabilities are related to the financing of the operations of the ITICs' subsidiaries in Hong Kong.

The HKMA will keep in close touch with the PBoC on developments that may affect the banking sector's exposure to the ITICs.

Hong Kong Monetary Authority
19 October 1998