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 Proposes Standards for IRRBB Reporting Under Basel Framework

    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.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    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.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    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.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    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.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    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.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    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.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    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.

    December 22, 2022 WebPage Regulatory News
    News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    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.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8699