Hong Kong Monetary Authority calls on lenders to provide ‘sympathetic’ credit relief to SMEs, never call loans early

The Hong Kong Monetary Authority (HKMA) on Thursday announced a set of measures designed to support small and medium-sized enterprises (SMEs), offering them reassurance about access to credit relief amid market rumours of loans being called early.

The nine points issued by the city’s de facto central bank, together with the Banking Sector SME Lending Coordination Mechanism, declared that banks involved in the mechanism must “never demand” early repayment from mortgage customers who repay on time.

Moreover, banks must offer a transition period of at least six months for credit-limit adjustments under certain conditions and “be sympathetic in providing suitable credit relief” to SMEs facing difficulties, including offering payment holidays and loan restructuring to ease cash-flow pressure, the HKMA said.

“SMEs are the bedrock of the Hong Kong economy and an important customer segment for banks,” HKMA said in a statement. “Although the local economy has been recovering gradually, some SMEs are still facing challenges in their operations.”

The measures are being rolled out to “assist SMEs in navigating a complex and ever-changing operating environment and to increase their bargaining power relative to banks”, the HKMA said.

Banks must consider extending the duration of partial principal repayment or even offering a principal moratorium for certain firms upon their request, the HKMA said. These arrangements also apply to loans taken out by personal customers for taxis, public light buses and commercial vehicles.

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Other measures the HKMA called for include faster handling of applications, better credit support and consideration of interest-rate and fee cuts.

The monetary authority said it will “follow up on the above measures” via the mechanism, and “maintain close communication and join hands” with the banking and commercial sectors in supporting the continuous development of SMEs.

The lending coordination mechanism, established by the HKMA in 2019 with participants including 11 banks that are the most active in SME lending, rolled out several rounds of relief measures during the Covid-19 pandemic. Since July 2023, its focus has been moving towards assisting SMEs in resuming normal repayments.

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“These new measures mark another step in helping SMEs navigate challenging market conditions,” the Hong Kong Association of Banks said in a written response to the announcement. “Banks in Hong Kong have been steadfast in leveraging their expertise and balance sheets to support customers in Hong Kong as the recovery takes hold.”

Banks will continue to “collaborate closely” with the HKMA and the business community to provide comprehensive support to SMEs, the association said.

“The collective efforts to support SMEs underscore the banking industry’s commitment to driving economic growth, job creation, and societal progress,” it added.

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“SMEs are the cornerstone of Hong Kong’s economy,” Winnie Tung, head of business banking at Standard Chartered Hong Kong, said in a statement.

The bank will waive account opening fees, account servicing fees and FPS handling fees this year for Business Banking clients who have applied for SME loans, she added.

HSBC will also be “stepping up our support to help SMEs manage short-term liquidity needs and seize new growth opportunities, ultimately driving a more inclusive and sustainable economic recovery”, said Frank Fang, general manager and head of commercial banking for Hong Kong and Macau.