Hong Kong banks pledge US$47 billion in SME loans after John Lee hears cries for help
SMEs will be able to access necessary financing to cope with the city’s evolving business environment, HKMA deputy CEO Arthur Yuen says
Sixteen major Hong Kong banks said they would set aside HK$370 billion (US$47 billion) of funds for small and medium-sized enterprises (SMEs) to cope with economic hardships. The loan amount could potentially rise after the city’s de facto central bank lowered a key capital requirement with immediate effect on Friday.
The Hong Kong Monetary Authority (HKMA) cut the countercyclical capital buffer ratio to 0.5 per cent from 1 per cent, which will release HK$300 billion to HK$400 billion in liquidity, allowing banks to extend more loans to SMEs, Arthur Yuen Kwok-hang, deputy CEO of the HKMA, said in a media briefing on Friday.
“While Hong Kong is currently undergoing economic transformation, the HKMA and the banking sector are aware of the needs of SMEs to strive for change and adapt to changes in the market and business operating environment,” Yuen said.
“The HK$370 billion of dedicated funds will allow SME customers to access necessary financing for coping with the evolving business environment. The HKMA will monitor if the banks are using the additional released capital to make more loans for the SMEs.”
The countercyclical capital buffer ratio is a mechanism to build up additional capital during periods of excessive credit growth. This capital can then be released when the credit cycle turns to absorb losses, enabling the banking system to continue lending in the subsequent downturn.
The HKMA also said that it would allow banks to adopt preferential capital treatment under the Basel III rules immediately, instead of from the beginning of next year. This will allow banks to use 15 percentage points less capital to support loans for SMEs with annual turnover of up to HK$500 million.
