Hong Kong’s de facto central bank is ramping up efforts to support small and medium enterprises (SMEs) with five initiatives aimed at facilitating access to bank financing and encouraging confidence in business transformation.
The Hong Kong Monetary Authority’s (HKMA) package, which was unveiled on Friday, includes an immediate reduction of the countercyclical capital buffer ratio from 1 percent to 0.5 percent. This buffer is designed to reinforce the resilience of the financial system by mandating banks to accumulate extra capital during economic upswings and relax capital-to-asset ratios during downturns.
HKMA CEO Eddie Yue Wai-man said a moderate reduction in the countercyclical capital buffer is appropriate to enhance bank support for Hong Kong’s economy given the challenges SMEs are facing. He added that future adjustments will be contingent on broader domestic economic growth and market conditions.
HKMA Deputy Chief Executive Arthur Yuen said that internal estimates suggest the move to release HK$300 billion ($38.6 billion) to HK$400 billion in capital for banks, sending a clear signal to SMEs that the banking industry, the HKMA, and the government all stand behind them.
The 16 banks actively engaged in SME lending, such as HSBC and Bank of China (Hong Kong), have collectively allocated more than HK$370 billion of dedicated funds for SMEs within their loan portfolios.
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The HKMA highlighted that these funds are intended to facilitate SMEs in accessing essential financing to navigate the changing business landscape, adding that banks will regularly reassess and potentially increase the size of these funds in response to the evolving needs and progress of SMEs.
Other measures comprise launching more credit products and services, increasing the partial principal repayment options, and accelerating the implementation of the enhancements to the SME financing guarantee program.
Under the new regulation, businesses with an annual turnover of up to HK$500 million will be covered — a substantial increase from the previous cap of HK$100 million.
In March, HKMA and the Banking Sector SME Lending Coordination Mechanism announced that 11 participating lenders in the mechanism would no longer demand early repayments from mortgage borrowers who repay on schedule, among the nine initiatives to support SMEs.
They will also offer clients a transition period of at least six months for credit limit adjustments and expedite the processing of applications for the 80 and 90 percent guarantee products under the government-backed SME Financing Guarantee Scheme.
Since the launch of these nine measures, approximately 20,000 SMEs have reaped the benefits, securing a combined credit limit exceeding HK$44 billion, according to the HKMA.
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The authority said it has been enhancing its comprehension of the challenges and requirements faced by SMEs across various sectors through diverse channels and platforms. Initiatives include the establishment of a task force on SME lending and engagement sessions with over 50 trade associations and their members representing a spectrum of industry sectors.
