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

    BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks

    A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.

    July 29, 2022 WebPage Regulatory News
    News

    EBA Examines Remuneration Data and Use of Large Exposure Exemptions

    The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).

    July 22, 2022 WebPage Regulatory News
    News

    BoE Issues Update on Ongoing Data Transformation Program

    The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues Draft Methodology and Templates for 2023 Stress Tests

    The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues SREP Guidelines and Standards for Investment Firms

    The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.

    July 21, 2022 WebPage Regulatory News
    News

    BoE and PRA Publish Regulatory Updates for Financial Sector Entities

    The Prudential Regulatory Authority (PRA) proposed expectations, via CP8/22, in respect of changes to the instruments or claims that comprise unvested deferred sums awarded to material risk-takers as part of their variable pay.

    July 19, 2022 WebPage Regulatory News
    News

    EIOPA Issues Taxonomy for Solvency II Reporting, Issues Other Updates

    The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.7.0 of the Solvency II data point model (DPM) and XBRL taxonomy.

    July 16, 2022 WebPage Regulatory News
    News

    OSFI Updates Address BCAR Reporting, Basel Reforms, and Cyber Risk

    The Office of the Superintendent of Financial Institutions (OSFI) updated the 2023 Basel Capital Adequacy Reporting (BCAR) manual as well as the 2023 BCAR return.

    July 15, 2022 WebPage Regulatory News
    News

    FSB Report Outlines Progress on Climate Risk Roadmap

    In a letter to the G20 Leaders, ahead of the July 2022 meeting, the Financial Stability Board (FSB) Chair set out an overview of the key work done by FSB.

    July 14, 2022 WebPage Regulatory News
    News

    SRB Issues Resolvability Assessment and Bail-in Implementation Guide

    The Single Resolution Board (SRB) published its resolvability assessment and "heat map" for 2021, updated the operational guidance on implementation of bail-in tool, and issued the annual report for 2021.

    July 14, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8400