HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme. This deferment should cover trade loans currently subject to the Scheme as well as those drawn between May 01, 2020 to July 31, 2020 by eligible customers with no outstanding payments overdue for more than 30 days, as at August 01, 2020. For facilities that are self-liquidating in nature, authorized institutions may require the loan to be settled when the underlying payment has been received by the customer. All other terms of the Scheme—as stated in the Annex to the HKMA circular on April 17, 2020—shall continue to apply.
The Pre-approved Principal Payment Holiday Scheme, effective from May 01, 2020, has helped alleviate cash-flow pressure faced by corporates, particularly SMEs. Taken together with other corporate relief initiatives rolled out by banks, as at end-June, more than 42,000 principal payment holidays or other forms of relief have been granted, amounting to more than HKD 500 billion. Since the launch of the Scheme in May 2020, the take-up rate has ranged between 10% to 20%. As such, HKMA, in consultation with the Mechanism, considers that rather than requiring authorized institutions to inform all eligible customers with trade loans of the extension, customers in need of relief should contact their authorized institutions to request the detailed terms of the ninety-day deferment, including the financial implications. In some cases, authorized institutions may need updated financial or business information from customers; however, they should handle the requests from all enquiring customers on a pre-approved basis.
HKMA mentioned that this extension of the Scheme will not by itself render a trade loan to be downgraded, nor will it cause the loan to be categorized as “rescheduled” as long as the terms of the extension are “commercial.” This principle applies whether or not the trade loan is already on a payment holiday. Borrowers who are unable to meet the restructured payment schedule should continue to be recognized in a timely manner and the classification of their loans should reference the HKMA guideline on loan classification system as well as previously issued frequently asked questions (FAQs). HKMA will continue to engage banks and commercial sectors through the Mechanism and expects to arrive at a decision, as soon as possible, regarding follow-up arrangements for the Scheme, which will end in October.
Keywords: Asia Pacific, Hong Kong, Banking, COVID-19, SME, Principal Payment Scheme, Loan Classification, Credit Risk, Payment Deferrals, Payment Holiday, HKMA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleFASB Simplifies Accounting for Certain Financial Instruments
PRA proposed rules (in CP12/21) for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA).
ECB Banking Supervision announced that euro area banks it directly supervises may continue to exclude certain central bank exposures from the leverage ratio until March 2022.
OSFI decided to increase the Domestic Stability Buffer from 1.00% to 2.50% of total risk-weighted assets, with effect from October 31, 2021.
HKMA is requesting banks to participate in a tech baseline assessment, which forms part of the HKMA Fintech 2025 strategy.
OSFI published two documents to consult on the management of operational risk capital data for institutions required, or for those applying, to use the Basel III standardized approach for operational risk capital in Canada.
The NGFS Study Group on Biodiversity and Financial Stability published a Vision paper exploring the case for action in addressing the financial stability concerns arising from biodiversity loss.
ACPR published the final version of CREDITIMMO 2.3.0 taxonomy for the decree of October 31, 2021.
EC, has approved, under the EU State Aid rules, the fourth prolongation of the Italian guarantee scheme to facilitate the securitization of non-performing loans.
ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.
EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.