HKMA, Banks to Launch Debt Payment Holiday Scheme for Corporates

All corporate customers with annual turnover under HK$800mn and with no outstanding loan payments more than 30 days overdue are eligible for a principal payment holiday.

The HKMA (Hong Kong Monetary Authority), together with the Banking Sector SME Lending Coordination Mechanism, has announced the launch of a Pre-approved Principal Payment Holiday Scheme for eligible corporate customers.

All corporate customers that have an annual sales turnover of HKD 800 million or less — estimated to cover more than 80% of all corporate borrowers in Hong Kong — and that have no outstanding loan payments overdue for more than 30 days are eligible for the Scheme.

Under the Scheme, all loan principal payments of eligible customers falling due within a 6-month period between 1 May and 31 October will be pre-approved for deferment. Principal payments of loans (including revolving facilities) will generally be deferred by 6 months, whereas trade facilities, given their short-term nature, will be deferred by 3 months.

In accordance with the HKMA’s existing loan classification guidelines, deferments of principal payment under the Scheme will not by themselves render the loan account to be downgraded to a lower category.

The Scheme does not cover syndicated loans or loans used to financing purchases of shares or other financial assets.

Banks are directed to begin informing eligible customers of the pre-approval under the Scheme within April, ahead of a 1 May launch date.

Eligible customers do not need to apply. They should only need to contact the bank within 14 days of the bank’s notice to confirm the detailed arrangements of the principal payment holiday.

The HKMA has issued a circular requesting all banks to participate in the Scheme, and has received support from all the 11 major lenders in the SME Lending Coordination Mechanism – which was established by the HKMA in October 2019.

In light of the economic challenges brought about by the Covid-19 outbreak, the banking sector considers it essential for the Scheme to be implemented quickly in order to alleviate the cash-flow pressure faced by corporate customers, the HKMA says.

Banks are reminded to devote sufficient resources to ensure the smooth operation of the Scheme, and to set up hotlines for customers who wish to make enquiries.

The HKMA says it will monitor the operation of the Scheme and maintain close dialogue with banks with the aim of improving the Scheme’s implementation on an ongoing basis.

For corporate customers not currently covered by the Scheme, the HKMA expects banks to adopt a “sympathetic stance” and proactively engage with those customers to understand whether they require similar assistance and assess case-by-case whether providing such arrangements is in line with established risk management principles.

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