Featured Product

    HKMA Announces Initiative to Support SMEs Amid COVID-19 Outbreak

    April 06, 2020

    HKMA issued a circular on a 100% Loan Guarantee Product under the Small and Medium-Sized Enterprise (SME) Financing Guarantee Scheme. The Financial Secretary proposed, in the Budget 2020-21, the introduction of a concessionary low-interest loan under the SME Financing Guarantee Scheme administered by the HKMC Insurance Limited (HKMCI), in which 100% loan guarantee will be provided by the government for a total loan guarantee commitment of HKD 20 billion (100% Scheme). The circular sets out the policy intent of HKMA on the relevant regulatory treatment in respect of a loan granted by any participating authorized institution to an eligible SME borrower under the 100% Scheme. Additionally, it has been notified that HKMA, along with the major banks and HKMCI. met representatives from the commercial sector (including Members of the Legislative Council) to exchange views on the effectiveness of banks’ measures to support SMEs and discuss future follow-up work in this regard.

    Large exposure, capital adequacy, and collateral risk management

    For the period in which the legal title of the loan remains with the authorized institution, HKMA will apply the same treatment as mentioned in its December 16, 2019 circular in relation to the Banking (Exposure Limits) Rules (BELR), Banking (Capital) Rules (BCR), and the Supervisory Policy Manual module CR-G-7 in respect of the authorized institutions’ credit exposures during the period.

    • BELR—The circular referred to above will be approved for the purposes of the BELR Rule 57(1)(d) in respect of an authorized institution’s exposure to the HKMCI arising from the provisions of the guarantee by the HKMCI under the 100% Scheme. Accordingly, for the exposure to the HKMCI arising from any loan to an SME which is covered by the HKMCI guarantee under the 100% Scheme, the amount so covered is deducted from the authorized institution’s exposures to the HKMCI.
    • BCR—An authorized institution may regard the Government's commitment to support the HKMCI for the 100% Scheme as a counter-guarantee under and treat this counter-guarantee as if it were the original guarantee issued by the HKMCI to the authorized institution for the 100% Scheme. In relation to the IRB approach, an authorized institution should seek HKMA's exemption approval under section 12(1) of BCR and apply the STC approach for loans granted under the 100% Scheme instead. 
    • SPM module CR-G-7—After taking into account the arrangements in relation to the 100% Scheme described above, HKMA would not consider it unreasonable for an authorized institution to regard the cover of the Government's commitment for the 100% Scheme as enabling the authorized institution to treat any loan to an SME which is covered by the respective HKMCI guarantee as "secured" for risk management purposes.

    Credit assessment and approval

    A participating authorized institution is expected to check the eligibility of the applicants based on the established criteria specified under the 100% Scheme and the loans will be transferred by the participating authorized institution as loan owner to The Hong Kong Mortgage Corporation Limited shortly after they are created without recourse. HKMA, therefore, considers that the residual credit risk exposure of the authorized institution should be very minimal and that the  regulatory requirements on credit assessment and credit risk management, as set out in the SPM module CR-G-2, do not apply to loans granted by an authorized institution under the 100% Scheme.

     

    Keywords: Asia Pacific, Hong Kong, Banking, SME, COVID-19, HKMCI, Guarantee Scheme, Large Exposure, BELR, BCR, Capital Adequacy, Collateral Management, HKMA

    Featured Experts
    Related Articles
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News
    News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    CBE Issues Additional Measures to Ease Disruptions from Pandemic

    The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7868