- Our Ref:
- POL/B9/53C
29 December 2000
The Chief Executive
All Authorized Institutions
Dear Sir/Madam,
Guidance Note on Taxi Financing
Following consultations with the Hong Kong Association of Banks,
the DTC Association and the Finance Houses Association of Hong Kong
Limited ("FHA"), the HKMA has recently revised the Taxi Financing
Guideline (enclosed in my letter of 19 September 2000) to take into
account the improved cashflow position of taxi operators after
changing to LPG taxis. The revised guideline is now issued as a
"Guidance Note on Taxi Financing" (the "Guidance
Note") for all authorized institutions. A copy of the Guidance
Note is enclosed with this letter. Whilst the recommendations in
the Guidance Note are not statutory, they nonetheless represent
best practices for the taxi financing business. We therefore expect
all authorized institutions engaging in such business to follow the
Guidance Note. Any institution which wishes to depart from the
Guidance Note is also expected to have prior consultation with the
HKMA.
The Guidance Note retains the concept of a loan cap for each
taxi licence but the loan cap has been increased from $2 million
(as previously stipulated in the FHA guideline) to $2.125 million
to take account of the improved cashflow position of taxi
operators. Also, the Guidance Note has introduced a maximum top-up
loan limit of $200,000 against additional tangible security (such
as in the form of cash deposits put up by a taxi dealer). However,
such tangible security must be retained by the lending institution
at least until the full amount of the top-up loan has been repaid.
Furthermore, before releasing the tangible security, lending
institutions should re-assess whether they are comfortable with the
loan-to-value ratio at the time of release as supported by the
remaining collateral (i.e. the taxi licence and car body).
To ensure that the recommendations in the Guidance Note reflect
the latest repayment ability of taxi operators, the Guidance Note
will be reviewed on a quarterly basis. To facilitate such a review,
a panel comprising 10 institutions that are active in taxi
financing and the two taxi dealers associations (the Hong Kong Taxi
and Public Light Bus Association and the Taxi Dealers and Owners
Association) will be established to provide data on the cashflow
position of taxi operators and value of taxi licence to the HKMA on
a quarterly basis. Based on the data provided, the HKMA will
calculate the average cashflow positions of taxi operators and
revise the Guidance Note if appropriate. As far as the taxi licence
is concerned, the loan cap will be set in the light of the latest
cashflow data provided by the panel but it will be subject to the
limit of not exceeding 85% of the value of the taxi licence.
The loan cap set out in the Guidance Note will be applicable to
all loans granted in the first quarter of 2001 and the next review
of the Guidance Note will be made at the end of the first quarter.
Authorized institutions will be notified in writing of any changes
to the Guidance Note arising from the review in due course.
Yours faithfully,
Y.K. Choi
Executive Director
(Banking Supervision)
- c.c.
- Encl.
c.c. The Hong Kong Association of Banks
The DTC Association
The Finance Houses Association of Hong Kong Limited
