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
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleBCBS Issues Principles for Operational Resilience and Risk
PRA proposed rules (in CP12/21) for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA).
ECB Banking Supervision announced that euro area banks it directly supervises may continue to exclude certain central bank exposures from the leverage ratio until March 2022.
OSFI decided to increase the Domestic Stability Buffer from 1.00% to 2.50% of total risk-weighted assets, with effect from October 31, 2021.
HKMA is requesting banks to participate in a tech baseline assessment, which forms part of the HKMA Fintech 2025 strategy.
OSFI published two documents to consult on the management of operational risk capital data for institutions required, or for those applying, to use the Basel III standardized approach for operational risk capital in Canada.
The NGFS Study Group on Biodiversity and Financial Stability published a Vision paper exploring the case for action in addressing the financial stability concerns arising from biodiversity loss.
ACPR published the final version of CREDITIMMO 2.3.0 taxonomy for the decree of October 31, 2021.
EC, has approved, under the EU State Aid rules, the fourth prolongation of the Italian guarantee scheme to facilitate the securitization of non-performing loans.
ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.
EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.