- Special meeting comes two days after the HKMA cut banks’ countercyclical capital buffer (CCB) for the first time since 2015, a reduction that unleashes up to HK$300 billion into the economy
- Banks may be asked to cut loan applicants some slack, and ignore any short-term sales slumps caused by the city’s four-month long civic unrest, as long as they are creditworthy in the long term, bankers said
Nine of Hong Kong's biggest banks will meet the city's de facto central bank on Wednesday to discuss how to help small and medium enterprises find financing to survive an expected downturn, as the economy heads for a technical recession in the fiscal third quarter ending in December.
The nine lenders include all three of the city's currency issuing banks " HSBC, Standard Chartered Bank, and Bank of China (Hong Kong) " as well as Hang Seng Bank and Bank of East Asia (BEA), said Thomas Tsui, head of corporate banking at BEA.
We could adopt "a special credit-approval procedure like the one made during the 2003 outbreak of the severe acute respiratory syndrome (Sars)," Tsui said in a telephone interview with South China Morning Post.
"That proved helpful to the SMEs. We can approve loans to SMEs even if their sales have dropped substantially in the past four months, provided they were stable the previous one to two years."
The meeting comes on the heels of an announcement by the Hong Kong Monetary Authority (HKMA) that it would cut the countercyclical capital buffer (CCB) by 50 basis points, a reduction that would unleash HK$300 billion (US$38 billion) of capital into the city's economy and financial system.
The money will be made available to support 330,000 small enterprises, especially those buffeted by four months of the worst political crisis in the city, said the HKMA's Chief Executive Eddie Yue Wai-man.
"Based on official data, we view the current slower banking system loan growth to be reflective of weaker demand for loans and not a supply issue," Goldman Sachs analysts Gurpreet Singh Shi and Guo Yingqiang wrote in a research note on Tuesday, adding that the HKMA's cut in CCB may not lead to more lending because companies are reluctant to borrow.
"Were the economic environment to result in worse-than-expected financial conditions at Hong Kong banks, the cut in capital buffer could help banks manage the impact and continue to lend."
The HKMA should require banks to use part, or all of the extra liquidity to help small businesses, said Janssen Chan, chairman of the SME committee of CPA Australia.
The meeting will also be attended by officials of the Hong Kong Mortgage Corporation, which arrange government guarantees on small-business loans, Tsui said.
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