The Hong Kong Monetary Authority (HKMA) will set up a task force to help small and medium-sized businesses facing pressure to repay loans, but industry leaders have expressed doubts over the measure as enterprises might fear having their lending cut.
The city’s de facto central bank said on Monday that it would put together a team from among its staff to help small and medium-sized enterprises (SMEs), according to its deputy CEO Arthur Yuen Kwok-hang.
“The SMEs can contact the HKMA directly through our hotline and emails, which we set up earlier. The HKMA will soon set up a task force to follow up on their cases,” he told the Post in a reply.
He added that further details about the task force would be shared at a later stage.
Concerns about the challenges faced by such businesses have remerged after real estate industry representatives met authorities earlier this month to discuss the tightening of property loans by banks amid a struggling post-pandemic recovery.
The Hong Kong General Chamber of Commerce also revealed in a recent survey that 74.3 per cent of small and medium-sized businesses polled cited cash flow as their biggest challenge in the coming 12 months.
Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, told the Post that some members faced pressure from banks to increase their collateral in recent months, putting financial stress on business owners.
“[For example,] they have mortgaged their property to borrow HK$12 million [US$1.5 million], but when the value of the property drops, they were pressured to repay HK$6 million to HK$8 million in a short period due to the depreciation,” he said.
Lawmaker Jeffrey Lam Kin-fung of the Business and Professionals Alliance for Hong Kong political party said he understood that multiple businesses that had managed to make their monthly repayments were also being subjected to such pressures by some banks.
Those affected included companies in the professional services, trading and manufacturing sectors, he added.
Financial Secretary Paul Chan Mo-po met key banks last week and urged them to ease the liquidity pressure faced by SMEs and to ensure their policies were being introduced at a frontline service level.
The minister has also been exerting pressure on banks since March to ease liquidity problems faced by such businesses and to help homeowners with mortgage obligations amid weak local consumption, as well as lacklustre stock and property markets.
The government also introduced nine supportive measures, including preventing banks from adjusting credit limits if the value of collateral depreciates and requiring them to give customers a grace period of at least six months if their credit limit was adjusted during an annual review.
But lawmaker Lam warned of a disconnect between authorities and frontline staff handling debtors.
While Lau from the association said the HKMA’s task force was set up with good intentions, he doubted it would prove effective in helping business owners since it could put them at a disadvantage with lenders.
“Banks can legally cancel loan agreements and make them repay at any time, so businesses may not speak out for fear of repercussions,” he said.
In response, HKMA’s Yuen said the authority hoped to see frontline staff at banks adopting a fair approach to supporting embattled businesses.
“However, if individual corporate clients have difficulties making repayments and the situation does not improve after some debt restructuring, the banks still need to take risk management measures to safeguard the interests of the bank and depositors.”
Yuen also said banks had promised in March that they would not request early repayment of mortgages even when property prices fell, as long as the borrowers kept making their monthly repayments.
The banks had continued to approve new mortgages, and the overall outstanding loans still reported a modest increase in the first half of the year, he said.
According to the HKMA’s quarterly survey, the total volume of SME loans in the city has remained consistent, with more than 92 per cent of such businesses maintaining the same credit loan amount from banks.
City leader John Lee Ka-chiu on Sunday pledged to boost support for struggling SMEs amid a challenging environment and looming external uncertainties, while expressing optimism that the local economy would improve next year.
In the long term, Lau said the government should work on stimulating the economy to help businesses out of the rough patch.
“If the economy recovers, these problems will naturally disappear too,” he said.
