HK Banking Sector Special Conference

The Hong Kong Monetary Authority (HKMA) arranged a conference with local banks on February 11, 2020, in order to discuss industry support policies for Small and Medium Enterprise clients in Hong Kong affected by the COVID-19 outbreak. The group of financial institutions, known as the Banking Sector SME Lending Coordination Mechanism, first met in October 2019 in order to establish an institutional support for Small and Medium Enterprises facing difficulties due to social unrest at the time. In addition to the HKMA, the Coordination Mechanism conferences are attended by the Hong Kong Association of Banks (HKAB), the nine major banks operating in the region and the Hong Kong Mortgage Corporation Limited (HKMC)

All participants at the conference agreed that SME’s in Hong Kong face considerable difficulty having already been under cash flow pressure due to 2019’s economic downturn. The effects are understood to be wide reaching across many sectors, while catering, retail, import/export and shipping also face considerable difficulty. Eight of the ten banks that attended the conference have already enacted support measures for SME’s while the two participants that had not yet done so will implement similar support measures soon, as will several banks that did not attend the meeting.

Hong Kong banks will continue to defer repayments and extend loan periods for SME’s while reducing fees, while some institutions will provide unsecured loans with an expedited approval process.

Institutions are also launching sector-targeted relief measures:

• For the Import and Export Sector, banks will be extending repayments for Trade Financing Facilities to match the extended business cycle with longer intervals between expenditure and profit. Companies will be able to leverage their trade financing facilities in order to access temporary overdraft privileges in order to gain more control over their cash flow.

• In the Transportation sector, banks will be providing temporary breaks from repayments and permission to postpone principal repayments in cases where the business is severely affected. Taxi and public light bus operators will be eligible for these measures.

• Retail customers of Hong Kong banks will soon be able to take advantage of postponed principal payments on mortgages and reduced credit card fees. The HKMA announced that while banks will generally be required to maintain the 30-year timespan on mortgage loans, the regulator will authorize exceptions in some cases with extenuating circumstances.

• HKMC Insurance Limited has committed to supporting local banks with policies directly aimed at financial institutions. HKMCI will simplify and expedite procedures to extend loan periods and process refinancing or altering trade finance repayment agreements, thereby eliminating the administrative burden of changing guarantee terms on a large scale. HKMCI has also expressed its openness to moratoriums and loan repayment schedule extensions in the consumer banking sector, permitting borrowers that make use of its Mortgage Insurance Programme to apply for support with their liabilities, while optimizing the application and approval process.

The conference concluded with an agreement to continue monitoring the situation and closely communicate regarding measures required to support SME’s in Hong Kong as necessary.

Small and Medium Enterprises in Hong Kong should note that the HKMC offers a SME Financing Guarantee Scheme that offers up to a 80% Guarantee Product with a matching Risk Sharing Factor, and since December 2019 also offers an 90% Guarantee through Special Concessionary Measures offered with the government’s support.

Should you have any enquiries about SME Financing or Mortgage Insurance, you can contact the HKMC here.

We feel that times of immense challenge also bring a proportionate scale of opportunity. We have seen numerous companies and individuals thrive by making investments precisely during periods when widespread panic opened the doors to ordinarily inaccessible pathways market entry strategies. If you have any interest in leveraging similar conditions today, our business advisory team can draw on our longstanding Hong Kong experience providing comprehensive corporate solutions that help individuals and enterprises navigate uncertain waters and thrive in the long run.

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