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 ArticleBOG to Explore New Prudential and Market-Conduct Measures for Banks
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.