Loans – HKMA Extends Relief for Trade loan Customers Another 90 Days
Trade loans granted 90-day extensions last year will start to fall due in February, but some trade customers are still facing cash flow pressure, the HKMA said.
The HKMA (Hong Kong Monetary Authority) together with the Banking Sector SME Lending Coordination Mechanism have announced another 90-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme.
Under the Scheme, trade loans were granted 90-day extensions in May, August and November 2020. Some of these loans will start to fall due in February 2021.
To address continued cash flow pressures faced by some trade customers, the Mechanism has agreed that corporate customers in need can further extend their trade facilities for another 90-day period.
In addition, eligible corporate customers can apply for a 90-day extension of trade facilities drawn down from November 2020 to end-January 2021. However, banks may require self-liquidating facilities to be settled by the customer first.
In the interest of prudent risk management, for trade loans which have been extended for 270 days or more cumulatively since they were first drawn down, banks can adopt a flexible approach and consider on a case-by-case basis whether other forms of relief (such as repaying the trade loans by instalments) are more suitable to help customers, the HKMA said.
To participate in the Scheme, corporate customers may contact their banks regarding deferment arrangements. Banks will handle deferment requests on a “pre-approved” basis, but may ask customers to provide up-to-date operational and financial information.
The Mechanism has also agreed that banks will be more flexible in handling the relevant new financing applications from the transportation sector, amid the difficulties operators face in upgrading and purchasing their vehicles.
The HKMA has clarified that banks do not need to rigidly adhere to the 85 percent loan-to-value ratio cap, provided that prudent risk management principles are observed and that the new loans are only used for purchase of new vehicles.
Participating banks also agreed to actively consider extending the maximum loan tenors in the transportation sector, on a temporary basis, for the next two years. Flexible principles will also be applied when handling requests for principal payment holidays and extensions.
The HKMA is currently engaging the industry to determine the way forward for the Pre-approved Principal Payment Holiday Scheme when it expires at end-April.