Eleven of Hong Kong’s banks have pledged to provide fair and quicker access to loans, as they heed the call by the city’s de facto central bank to cut red tape and provide funding help to small businesses and mortgage borrowers.
Six of the biggest banks, with a combined 80-per cent share of the city’s mortgages, signed on to a pledge to approve all eligible applications within two weeks, said Arthur Yuen Kwok-hang, deputy chief executive of the Hong Kong Monetary Authority (HKMA). The banks are HSBC, Standard Chartered, Bank of China (Hong Kong), Bank of East Asia, Hang Seng Bank and ICBC Asia.
The mortgage lenders are among the 11 members of the HKMA’s Task Force on SME Lending, which Yuen chairs along with Luanne Lim, the chairwoman of the Hong Kong Association of Banks (HKAB).
“HKMA will not instruct banks on how to make the loan [assessments], but make sure that banks adopt a fair and tolerant manner to help clients with their financial needs,” Yuen said in a media briefing on Friday. “The task force is a channel for SMEs to reflect their [funding] difficulties, and for the HKMA and lenders to work with them in finding a solution.”
The two-week pledge would be a sea change from the current process that takes between two and three months to approve eligible applications, said Eric Tso Tak-ming, the chief vice-president of mortgage broker mReferral.
“A speedy approval will provide more certainty to homebuyers, which will allow them to better prepare for their finances,” Tso said.
Hong Kong’s business owners are cash-starved, as interest rates hover at the highest level in almost two decades. Cash flow is the biggest challenge in the next 12 months for 74.3 per cent of business owners surveyed recently by the Hong Kong General Chamber of Commerce.
The squeeze has been felt in the property industry amid a protracted sales slump. Some SMEs have been asked by their lenders to fortify their property collateral, as real estate prices have fallen faster than the banks’ valuation, said Danny Lau Tat-pong, the honorary chairman of the Hong Kong Small and Medium Enterprises Association.
To ease the pain, Hong Kong’s Financial Secretary Paul Chan Mo-po last week urged the six largest banks to ease the liquidity pressure for SMEs and to ensure that the quick-approval policies would be executed at the front line.
“SMEs are vital to Hong Kong’s society and economy,” said Sun Yu, the chief executive of the Bank of China (Hong Kong), one of the city’s three currency-issuing banks. “Supporting SMEs is not merely our profession and our business, it is also the social responsibility that we must bear.”
The task force will handle the financing needs of small-and-medium enterprises (SMEs) on a “case-by-case basis”, said the HKMA’s chief executive Eddie Yue Wai-man. “The task force will also identify problems or industry-wide issues for improvement. It will arrange regular meetings to enhance communication between the HKMA, SMEs, chambers and other stakeholders.”
The bankers’ guild is also doing its part in response to the nine relief measures unveiled by the government in March. Banks are barred from shrinking their credit limits if the collateral value depreciates, and they must give customers at least six months of grace period if their credit were to be adjusted.
The banks promised in March to refrain from requesting the early payment of mortgages even amid declining property prices for so long as the monthly instalments are kept up. If borrowers cannot repay their loans after restructuring, banks would still need to take appropriate actions as risk management measures, Yuen said.
“HKAB since March has adopted a wide range of measures to support SMEs,” said Lim, who is also the chief executive of HSBC Hong Kong, adding that the city’s banks have not reduced their loans to SMEs.
The total outstanding value of mortgage loans increased 1.4 per cent in the first six months of 2024, negating any suggestion that banks have tightened their loans, she said. The HKMA’s data also showed that overall loans to small businesses had not dropped.
Around 7,000 of HSBC’s SME customers have benefited from the government-mandated relief measures such as interest rebates, waivers, new facilities or loan extensions, she said.
