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.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Related Articles
APRA Issues Interim Update to Policy Priorities for 2021 and Beyond
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
EC Adopts Solvency II and Resolution Rules Package for Insurers
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
OCC Issues Booklets on Regulatory Reporting and Earnings
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
ECB Sets Out Results of Economy-Wide Climate Stress Tests
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
EBA Examines Implications of Increasing Use of Digital Platforms in EU
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
