HKMA, in consultation with the Banking Sector Small and Medium-sized Enterprise (SME) Lending Coordination Mechanism, has developed a Pre-approved Principal Payment Holiday Scheme. In this scheme, participating institutions will pre-approve deferment of loan principal payments falling due between May 01, 2020 and October 31, 2020 for eligible small-to-mid-size corporates for up to six months. In accordance with the HKMA loan classification guidelines, deferments of principal payments under the scheme will not by themselves render a loan account to be downgraded to a lower category.
HKMA expects all authorized institutions to participate in the scheme under the same terms. The 11 major lenders in the Banking Sector SME Lending Coordination Mechanism, which together account for over half of the total bank lending in Hong Kong, have confirmed their participation in the scheme. The scheme is intended to provide immediate relief to small and medium corporates affected by the COVID-19 outbreak. All corporate borrowers that have an annual sales turnover of less than or equal to HKD 800 million and that have no outstanding loan payments overdue for more than 30 days are eligible for the scheme. Authorized institutions should ensure that they dedicate sufficient resources to implementing and operating the scheme. The terms of the scheme have been set out in the Annex to the circular.
Applications by borrowers are not required so that financial relief can be provided to corporates in the timeliest manner. For corporate customers that are not currently covered by the scheme or have payment falling due before May 01, 2020, HKMA expects authorized institutions to proactively reach out to these customers to understand whether they require similar assistance and assess, on a case-by-case basis, whether it is in line with established risk management principles to provide such arrangements. In the coming days, HKMA will issue a list of frequently asked questions that pertain to the operations of the scheme, and establish a hotline for corporate customers which wish to provide feedback on individual banks’ implementation of the scheme.
Keywords: Asia Pacific, Hong Kong, Banking, COVID-19, SME, Principal Payment Scheme, Loan Classification, Credit Risk, HKMA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleFED Announces Rule Change in Relation to Paycheck Protection Program
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.