HKMA Publishes Guideline on Sustainable Finance Grant Scheme
HKMA published a statement on the 100% Personal Loan Guarantee Scheme and a guideline on the Green and Sustainable Finance Grant Scheme (GSF Grant Scheme) as announced in the 2021-22 Budget. The GSF Grant scheme will provide subsidy to eligible bond issuers and loan borrowers to cover their expenses on bond issuance and external review services. The guideline sets out the eligibility criteria and application process of the GSF Grant Scheme. The GSF Grant scheme will commence on May 10, 2021 and last for three years. HKMA will monitor market developments and may update or adjust certain details of the scheme as needed.
With respect to the 100% Personal Loan Guarantee Scheme, the HKMC Insurance Limited (HKMCI) made the following statements to protect the interest of the applicants in view of the ongoing fraudulent events observed:
- When banks review loan applications under the scheme, they will exercise professional expertise, judgment, and care in conducting customer due diligence and verifying the eligibility of the borrowers. HKMCI will also conduct appropriate checks and strive to ensure that the approved applications meet the requirements. If the banks and the HKMCI discover any suspected illicit behavior (for example, producing false declaration or using false instrument), they will report to the law enforcement agencies for assistance.
- The public should pay attention that the participating banks will try their best to provide assistance to the applicants without levying any application fee or handling fee. The banks will remind the applicants that they need not make applications via a third party. If the borrowers pay any so-called fees to a third party during applications, they will suffer a direct financial loss.
- A list of the banks and their enquiry hotlines is available online.
The overall default rate of the scheme is assumed to be 25%. As the HKMCI had no experience in providing 100% loan guarantee for unemployed persons and, considering that no credit assessment is required under the scheme and the applicants are unemployed, the same assumption as for the Special 100% Loan Guarantee for small and medium enterprises is adopted. Notwithstanding this, the actual default rate will depend on various factors, such as whether the economic environment will improve. Taking the 80% Guarantee Product under the SME Financing Guarantee Scheme as an example, although the overall assumed default rate is 12%, the actual cumulative default rate of the product is 3.8% since its launch in 2012.
Keywords: Asia Pacific, Hong Kong, Banking, Credit Risk, Sustainable Finance, COVID-19, GSF Grant Scheme, ESG, HKMA
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