BANKS URGED TO OFFER CREDIT RELIEF TO SMEs
HKMA reassures small enterprises on access to financing support in difficult market conditions amid rumours of loans being called early
The Hong Kong Monetary Authority (HKMA) yesterday announced a set of measures designed to support small and medium-sized enterprises (SMEs), offering them reassurance about access to credit relief amid market rumours of loans being called early.
The nine points issued by the city’s de facto central bank, together with the Banking Sector SME Lending Coordination Mechanism, declared that participating banks must “never demand” early repayment from mortgage customers who repaid on time.
Banks must also offer a transition period of at least six months for credit limit adjustments under certain conditions and “be sympathetic in providing suitable credit relief” to SMEs facing difficulties, including offering payment holidays and loan restructuring, the HKMA said.
“SMEs are the bedrock of the Hong Kong economy and an important customer segment for banks,” the authority said. “Although the local economy is recovering gradually, some SMEs are still facing challenges in their operations.”
The measures were being rolled out to “assist SMEs in navigating a complex and everchanging operating environment and increase their bargaining power relative to banks”, it said.
Banks must consider extending the duration of partial principal repayment or even offering a principal moratorium for certain firms on their request, the HKMA said.
These arrangements also apply to personal loans for taxis, public light buses and commercial vehicles.
Rumours about banks calling loans early have circulated in recent weeks despite denials from some lenders, and minibus operators said in late February about 100 vehicles had been towed away for failure to repay loans.
Other measures announced by the HKMA include faster handling of applications, better credit support and consideration of interest rate and fee cuts.
The authority said it would “follow up on the above measures” via the mechanism and “maintain close communication and join hands” with the banking and commercial sectors in supporting the continuous development of SMEs.
The lending coordination mechanism, established by the HKMA in 2019 with participants, including the 11 banks most active in SME lending, rolled out several rounds of relief measures during the Covid-19 pandemic. Since July last year, its focus has been moving towards assisting small firms in resuming normal repayments.
“These new measures mark another step in helping SMEs navigate challenging market conditions,” the Hong Kong Association of Banks said in a written response to the announcement.
“Banks in Hong Kong have been steadfast in leveraging their expertise and balance sheets to support customers in Hong Kong as the recovery takes hold.
“The collective efforts to support SMEs underscore the banking industry’s commitment to driving economic growth, job creation, and societal progress.”