HKMA Announces Repayment Deferment Under Payment Holiday Scheme
HKMA, together with the Banking Sector Small and Medium-Size Enterprise (SME) Lending Coordination Mechanism, announced a ninety-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme. This deferment should cover trade loans currently subject to the Scheme as well as those drawn between May 01, 2020 to July 31, 2020 by eligible customers with no outstanding payments overdue for more than 30 days, as at August 01, 2020. For facilities that are self-liquidating in nature, authorized institutions may require the loan to be settled when the underlying payment has been received by the customer. All other terms of the Scheme—as stated in the Annex to the HKMA circular on April 17, 2020—shall continue to apply.
The Pre-approved Principal Payment Holiday Scheme, effective from May 01, 2020, has helped alleviate cash-flow pressure faced by corporates, particularly SMEs. Taken together with other corporate relief initiatives rolled out by banks, as at end-June, more than 42,000 principal payment holidays or other forms of relief have been granted, amounting to more than HKD 500 billion. Since the launch of the Scheme in May 2020, the take-up rate has ranged between 10% to 20%. As such, HKMA, in consultation with the Mechanism, considers that rather than requiring authorized institutions to inform all eligible customers with trade loans of the extension, customers in need of relief should contact their authorized institutions to request the detailed terms of the ninety-day deferment, including the financial implications. In some cases, authorized institutions may need updated financial or business information from customers; however, they should handle the requests from all enquiring customers on a pre-approved basis.
HKMA mentioned that this extension of the Scheme will not by itself render a trade loan to be downgraded, nor will it cause the loan to be categorized as “rescheduled” as long as the terms of the extension are “commercial.” This principle applies whether or not the trade loan is already on a payment holiday. Borrowers who are unable to meet the restructured payment schedule should continue to be recognized in a timely manner and the classification of their loans should reference the HKMA guideline on loan classification system as well as previously issued frequently asked questions (FAQs). HKMA will continue to engage banks and commercial sectors through the Mechanism and expects to arrive at a decision, as soon as possible, regarding follow-up arrangements for the Scheme, which will end in October.
Keywords: Asia Pacific, Hong Kong, Banking, COVID-19, SME, Principal Payment Scheme, Loan Classification, Credit Risk, Payment Deferrals, Payment Holiday, HKMA
Previous Article
HKMA Updates Policy Module for Non-Centrally Cleared OTC DerivativesRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards