HKMA issued a circular on exposure to HKMC Insurance Limited (HKMCI), a wholly owned subsidiary of The Hong Kong Mortgage Corporation Limited, with respect to 90% Loan Guarantee Product under the SME Financing Guarantee Scheme or SFGS (90% Guarantee Scheme). HKMCI announced the introduction of 90% Guarantee Scheme with effect from December 16, 2019. A total guarantee commitment of HKD 33 billion will be guaranteed for the product by the government. The government issued a letter to HKMA on December 12, 2019 confirming its commitment under the scheme. The circular confirmed that this letter by the government has been approved for the purposes of Banking (Exposure Limits) Rules (BELR) Rule 57(1)(d) in respect of the exposure of an authorized institution to the HKMCI, arising from the provisions of the guarantee by the HKMCI under the 90% Guarantee Scheme.
For the exposure to the HKMCI arising from any loan to small and medium-sized enterprises (SMEs), which is covered by the HKMCI guarantee under the 90% Guarantee Scheme, the amount so covered is deducted from the exposures of an authorized institution to the HKMCI. For capital adequacy calculation purposes, authorized institutions participating in the 90% Guarantee Scheme should follow the relevant requirements set out in the Banking (Capital) Rules (BCR) for calculating the risk-weighted amount of their related exposures to the HKMCI under the Scheme. While an authorized institution should conduct its own review of the relevant requirements in sections 100(9), 134(6), 216(3A), or 217(4) of the BCR, HKMA would not consider it unreasonable for an authorized institution to regard the cover of the government’s commitment for the Scheme to be adequate and effective for the purposes of credit risk mitigation.
HKMCI welcomes all lenders under the SFGS to participate in offering loans under the 90% Guarantee Product. Over twenty lenders have indicated their interest, of which several major banks have confirmed to start receiving applications. These include Bank of China (Hong Kong) Limited, DBS Bank (Hong Kong) Limited, Hang Seng Bank Limited, Standard Chartered Bank (Hong Kong) Limited, and The Hongkong and Shanghai Banking Corporation Limited. The application period will last until June 30, 2022. The 90% Guarantee Product aims to provide additional support to smaller-sized enterprises, to businesses with relatively less operating experience, and to professionals seeking to set up their own practices to obtain financing. Each eligible enterprise can obtain guarantee for term loans up to HKD 6 million, with a maximum guarantee period of five years and the same guarantee fee rate as the existing 80% Guarantee Product.
Keywords: Asia Pacific, Hong Kong, Banking, BELR, BCR, Capital Adequacy, SFGS, Credit Risk, HMCI, SME, Commercial Lending, Large Exposures, HKMA
Previous ArticleFHFA Proposes to Amend Stress Testing Rule
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).