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    HKMA Relaxes Prudential Measures for Non-Residential Property Loans

    August 19, 2020

    HKMA announced adjustments to the prudential measures for mortgage loans on non-residential properties, in view of the impact of COVID-19 outbreak and the rising geopolitical tensions. The applicable loan-to-value ratio caps for mortgage loans on non-residential properties have been adjusted upward by 10 percentage points, from 40% to 50% for general cases. The Annex to the HKMA Circular sets out the applicable loan-to-value ratio caps and debt-servicing ratio limits for various residential and commercial property mortgage loans under different scenarios. The announced adjustments take effect from August 20, 2020.

    With business confidence continuing to be affected by the COVID-19 pandemic and the rising geopolitical tensions, non-residential property market has contracted in the first half of 2020 and is likely to remain under pressure. In view of these developments, HKMA considers it appropriate to adjust the countercyclical macro-prudential measures for mortgage loans on non-residential properties. The measure applies to transactions where the provisional sale and purchase agreement is signed on or after that date. There are no changes to the other countercyclical macro-prudential measures including those relating to residential properties. HKMA also reiterated in its circular that its countercyclical macro-prudential measures are intended to apply to mortgage loans for the purpose of financing property transactions or the refinancing of existing properties. They are not intended to apply to credit facilities secured by properties for the purpose of financing the business operation of corporates, as these credit facilities are subject to a set of comprehensive credit underwriting standards and regular credit reviews by authorized institutions.


    Effective Date: August 20, 2020

    Keywords: Asia Pacific, Hong Kong, Banking, Mortgage Loans, Loan to Value Ratio, RRE, CRE, Macro-Prudential Policy, Basel, Credit Risk, COVID-19, HKMA

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