HKMA, in consultation with the Banking Sector Small and Medium-sized Enterprise (SME) Lending Coordination Mechanism, has developed a Pre-approved Principal Payment Holiday Scheme. In this scheme, participating institutions will pre-approve deferment of loan principal payments falling due between May 01, 2020 and October 31, 2020 for eligible small-to-mid-size corporates for up to six months. In accordance with the HKMA loan classification guidelines, deferments of principal payments under the scheme will not by themselves render a loan account to be downgraded to a lower category.
HKMA expects all authorized institutions to participate in the scheme under the same terms. The 11 major lenders in the Banking Sector SME Lending Coordination Mechanism, which together account for over half of the total bank lending in Hong Kong, have confirmed their participation in the scheme. The scheme is intended to provide immediate relief to small and medium corporates affected by the COVID-19 outbreak. All corporate borrowers that have an annual sales turnover of less than or equal to HKD 800 million and that have no outstanding loan payments overdue for more than 30 days are eligible for the scheme. Authorized institutions should ensure that they dedicate sufficient resources to implementing and operating the scheme. The terms of the scheme have been set out in the Annex to the circular.
Applications by borrowers are not required so that financial relief can be provided to corporates in the timeliest manner. For corporate customers that are not currently covered by the scheme or have payment falling due before May 01, 2020, HKMA expects authorized institutions to proactively reach out to these customers to understand whether they require similar assistance and assess, on a case-by-case basis, whether it is in line with established risk management principles to provide such arrangements. In the coming days, HKMA will issue a list of frequently asked questions that pertain to the operations of the scheme, and establish a hotline for corporate customers which wish to provide feedback on individual banks’ implementation of the scheme.
Keywords: Asia Pacific, Hong Kong, Banking, COVID-19, SME, Principal Payment Scheme, Loan Classification, Credit Risk, HKMA
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