HKMA Relaxes Prudential Measures for Non-Residential Property Loans
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
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Related Articles
BIS Examines Use of Big Data and Machine Learning at Central Banks
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB Publishes Guide for Determining Penalties for Regulatory Breaches
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS Sets Out Good Practices to Manage Operational Risks Amid COVID
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR Announces New Data Collection Application for Banks and Insurers
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB Publishes Overview of Resolution Tools Available in Banking Union
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
