The Hong Kong Monetary Authority (HKMA), together with the Banking Sector SME Lending Coordination Mechanism (Mechanism), today (27 April) announced a further 90-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme (Scheme) to the end of July 2023, when the whole Scheme will expire.  This repayment deferment applies only to existing trade loans under the Scheme.

Although the impact of the pandemic on the global economy and the local economy have substantially receded, a small number of trading companies are still facing some degree of funding pressure.  In view of this, the Mechanism has decided to extend the repayment period of trade facilities under the Scheme by a further 90-day period.  In order not to hinder the eventual unwinding of the Scheme, the Mechanism considers it appropriate to limit the scope of the repayment deferment to existing trade loans under the Scheme.

Existing trade loans under the Scheme falling due between May and July 2023 can be extended by a further 90 days.  For facilities which are self-liquidating, banks may require the loan to be settled when the customer has received the underlying payment.  For trade loans which have been successively extended for 270 days or more since first being drawn down, banks may adopt a flexible approach and consider, on a case-by-case basis and subject to prudent risk-management principles, whether other forms of relief are more suitable to help the customers ride out their difficulties.

The Mechanism encourages customers who are financially able and willing to resume some principal repayment in exchange for greater certainty about their future repayment schedule, to take up the partial principal repayment options pursuant to the HKMA's guidance of 20 October 2022.  For trade facilities, banks may discuss with customers having regard to their actual circumstances and allow them to repay the amount due by regular instalments over a period of two years.

If corporate customers have enquiries about the Scheme, they may contact the HKMA via the dedicated email account (ppphs@hkma.gov.hk) or enquiry hotline (2878 1199).  

Background

The Banking Sector SME Lending Coordination Mechanism was established by the HKMA in October 2019.  Participants include 11 banks that are most active in SME lending.  The Hong Kong Association of Banks and the HKMC Insurance Limited are also represented in the Mechanism.  Since its establishment, the Mechanism has rolled out several rounds of relief measures for corporate customers, including the Pre-approved Principal Payment Holiday Scheme, loan tenor extensions, and the conversion of trade financing lines into temporary overdraft facilities.  At the end of March 2023, banks had granted over 113,000 applications for loan tenor extension and other forms of relief, involving an aggregate amount of HK$1.1 trillion.

The Scheme took effect in May 2020 with around 100 participating banks and covers around 120,000 eligible corporate customers.  Since its launch, the Scheme has been extended six times to the end of July 2023.  Between November 2022 and January 2023, the number of participating corporate customers declined to 1,300 (participation rate of 1%), significantly lower than 19,000 (participation rate of 16%) when the Scheme was launched.  To facilitate corporates to prepare for an eventual resumption of normal repayment, the Mechanism introduced in May 2022 a one-year 20% principal repayment option and in October 2022 a two-year 50% principal repayment option under the Scheme for corporates to take up on a voluntary basis.