Featured Product

    HKMA Extends Principal Payment Holiday Scheme by Six Months

    March 04, 2021

    HKMA decided to further extend, by six months, the pre-approved Principal Payment Holiday Scheme, which was earlier set to expire in April. HKMA considers that a further six-month extension of the scheme is appropriate, as the impact of COVID-19 pandemic lingers on and some small and medium enterprises (SMEs) continue to face challenging operating environment. The extension has received full support of the 11 major lenders of the Banking Sector SME Lending Coordination Mechanism.

    Moreover, for a loan that has been extended for 540 days or more cumulatively since it was first drawn down (or a trade loan which has been extended for 270 days or more cumulatively since it was first drawn down), authorized institutions can adopt a flexible approach and consider, on a case-by-case basis, whether other forms of relief are more suitable to help the customers ride out the current difficulties, subject to prudent risk management principles. With such an extension, the principal payments of all loans of eligible corporate borrowers (that is, borrowers with an annual turnover less than HKD 800 million and with no loan payment overdue for more than 30 days as at May 01, 2021) falling due between May 01 and October 31, 2021 should be deferred by six months except for repayments of trade loans, which should be deferred by 90 days. The deferment applies whether or not a loan has previously been on a principal payment holiday.

    In line with the existing terms of the scheme, authorized institutions may require a borrower to settle trade facilities which are self-liquidating in nature if the borrower receives the underlying payment during the extended deferment period. For revolving facilities that are due for credit review between May 01, 2021 and October 31, 2021, authorized institutions should not adjust downward the existing facility limits within six months from the review dates. As stated in the HKMA guidance dated September 02, 2020 and January 29, 2021, the extension or other case-by-case relief arrangement will not result in a loan being downgraded, nor will it cause the loan to be categorized as rescheduled as long as the terms of the deferment are commercial. In addition, the guidance issued by the Hong Kong Institute of Certified Public Accountants stipulates that the provision of payment holidays to borrowers should not automatically result in loans being considered to have suffered a significant increase in credit risk for determining the expected credit loss, which is in line with the BCBS guidance. Authorized institutions should continue to recognize and classify loans of borrowers that are unable to meet the restructured payment schedule in a timely manner, in line with the HKMA guideline on loan classification system, and to make adequate provisions as and when needed.

     

    Keywords: Asia Pacific, Hong Kong, Banking, COVID-19, Payment Deferrals, SME, Credit Risk, ECL, Loan Classification, HKMA

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    EBA Updates Lists of Entities for Use in Capital Calculations under SA

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6826