The first meeting of the Banking Sector SME Lending Coordination Mechanism established by the Hong Kong Monetary Authority (HKMA) was held today. The meeting was attended by representatives from the Hong Kong Association of Banks (HKAB), nine major banks and the Hong Kong Mortgage Corporation Limited (HKMC).
The HKMA reiterated at the meeting that SMEs are a major pillar of the Hong Kong economy. Banks should provide funding support to SMEs as far as their credit policies and risk management principles allow. Banks attending the meeting appreciated that, given the current economic environment, some SMEs may face financial difficulties. Banks will follow the guidelines set out in the “Hong Kong Approach to Corporate Difficulties” and be sympathetic to SME customers encountering financial difficulties. Banks will enhance communication with these customers and will not withdraw credit lines hastily or take other credit actions that will adversely affect the customers’ business operations.
At the first meeting, the banks agreed to adopt the following measures to support SMEs:
With regard to banks’ question at the meeting on whether loans with rescheduled repayment periods in support of SMEs should be classified as ‘rescheduled loans’, the HKMA clarified that under existing supervisory guidelines, a rescheduled loan refers to one which has been restructured or renegotiated either because of a deterioration in the financial position of the borrower or because of the inability of the borrower to meet the original repayment schedule, and the revised repayment terms are “non-commercial” to the bank concerned. If a bank proactively revises the repayment terms to support a borrower with overdue payments for a short period, and the revised repayment terms are “commercial”, the loan to the borrower does not fall within the definition of 'rescheduled loan'. Accordingly, the bank need not categorise the loan as non-performing nor make any provision. A revision of repayment terms will generally be regarded as “commercial” if it does not involve a reduction in principal repayment, and the applicable interest rates of the loan are not substantially below prevailing market levels.
The HKMA, together with the banking sector, will continue to maintain close dialogue with the commercial sector with a view to providing appropriate support to SMEs and helping them tide over the current difficulties.
Hong Kong Monetary Authority
16 October 2019