HKMA announced that the application period for principal moratorium for the 80% and 90% Guarantee Products under the Small and Medium-Sized Enterprise (SME) Financing Guarantee Scheme has been extended for 6 months, to March 31, 2021. Additionally, the maximum duration of principal moratorium has been increased from 12 months to 18 months. The loan guarantee period can also be extended correspondingly. Furthermore, HKMA, along with the Banking Sector SME Lending Coordination Mechanism, announced that the Pre-approved Principal Payment Holiday Scheme has been extended for an additional 6 months, to April 2021. All loan principal payments of eligible customers falling due between November 2020 and April 2021 will be deferred by 6 months, except for repayments of trade loans, which will be deferred for 90 days.
The Pre-approved Principal Payment Holiday Scheme covers all corporate customers that have an annual sales turnover below HKD 800 million and that have no seriously overdue loan payments. Corporate customers in need of relief are requested to contact their banks. Banks will handle each eligible customer’s case on a "pre-approved" basis. Banks may request customers (especially those who have been granted multiple extensions of payment holidays) to provide up-to-date business and financial information to better understand their needs when processing their cases. 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. Additionally, for revolving facilities that are due for credit review between November 01, 2020 and April 30, 2021, authorized institutions should not adjust downward the existing facility limits within six months from the review dates.
All other terms of the Scheme—as set out in Annex to the HKMA circular dated April 17, 2020—shall continue to apply. HKMA also noted that, like the extension for trade loans announced in August 2020, this extension 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.” HKMA further notes that 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 the purposes of determining expected credit loss, which is in line with guidance published by BCBS. The above two principles apply regardless of whether or not a loan is already on a payment holiday. HKMA also mentioned that authorized institutions should continue to recognize and classify loans of borrowers that are unable to meet the restructured payment schedule in a timely manner, referencing the HKMA guideline on loan classification system, and to make adequate provisions as and when needed.
Keywords: Asia Pacific, Hong Kong, Banking, COVID-19, SME, Principal Payment Scheme, Loan Classification, Credit Risk, Loan Guarantee, Payment Deferrals, Basel, ECL, Loan Moratorium, 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 ArticleFCA to Extend SM&CR Deadline for Solo-Regulated Firms
US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year.
EIOPA is consulting on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.
APRA announced that it is resuming consultation on the confidentiality of data submitted to APRA by the authorized deposit-taking institutions.
BoE and FCA are supporting and encouraging liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA, instead of LIBOR, from October 27, 2020.
Deutsche Bundesbank published special schema files for securities holdings statistics (SHS), along with a document on the XML format description.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
ESMA announced that it will recognize three central counterparties (CCPs) established in the UK as third-country CCPs, from January 01, 2021.
PRA published Version 02.04 of the PRA110 liquidity metric monitoring tool (PRA110 LMM tool).
FSB confirmed the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) as the International Governance Body for the globally harmonized identifiers used to track over-the-counter (OTC) derivatives transactions, with effect from October 01, 2020.
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.