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COVID-19 Related Circulars or Guidance (Non-Exhaustive) Published By Financial Services Regulators of Hong Kong (Last Updated: 3 June 2022) | Perspectives & Events

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Hong Kong Monetary Authority (HKMA) Circulars/Guidelines

 

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1 Supervisory Policy Manual (SPM): New module OR-2 on “Operational Resilience” and revised module TM-G-2 on “Business Continuity Planning”

The HKMA published a circular on 31 May 2022 to inform all Authorised Institutions (AIs) that, following consultation with the industry, the HKMA has issued a new SPM module OR-2 on “Operational Resilience” and a revised version of the SPM module TM-G-2 on “Business Continuity Planning”. 

According to paragraph 1 of SPM OR-2, (i) operational disruptions include “those due to pandemics, cyber incidents, technology failures and natural disasters”, and (ii) HKMA adopts the definition of operational resilience in the Principles for Operation Resilience (POR) issued by the Basel Committee on Banking Supervision in March 2021, namely, “the ability of a bank to deliver critical operations through disruption”.

New SPM module OR-2 and revised SPM module TM-G-2 

The modules serve to implement the POR. Specifically: 

  • The new SPM OR-2, issued as a guidance note, specifies the HKMA’s overall approach to operational resilience. It sets out the HKMA’s expectation that every authorized institution (AI) should be operationally resilient, and provides high-level guidance on how AIs can develop an integrated and holistic operational resilience framework to support this.
  • The revised SPM TM-G-2 complements SPM OR-2 by providing enhanced guidance on business continuity planning, which is a key component of an effective operational resilience framework. It incorporates additional requirements related to business continuity planning and testing covered within the POR, and also aligns the terminology used for business continuity planning and operational resilience purposes to enhance clarity. 

AIs should note that many of the concepts and requirements related to operational resilience are not new and are already covered extensively under existing HKMA guidance. AIs should therefore refer to the relevant SPM modules when implementing the requirements of SPM OR-2. Besides the revised SPM TM-G-2, other relevant SPM modules also include SPM SA-2 on “Outsourcing” and the forthcoming revised SPM OR-1 on “Operational Risk Management”, which is being refined having regard to comments received from the industry, to reflect the operational risk management requirements contained within the POR. 

Implementation timeline

The implementation timeline detailed within SPM OR-2 was set by HKMA after factoring in industry feedback. HKMA will expect every AI to have: 

(i) developed its operational resilience framework and determined the timeline by which it will become operationally resilient, within 1 year after the SPM OR-2 is issued (i.e. 31 May 2023); and 

(ii) become operationally resilient as soon as their circumstances allow and no later than 3 years after the initial 1-year planning period (i.e. no later than 31 May 2026). 

The above timeline applies to all new requirements related to operational resilience, including those contained in the revised SPM TM-G-2 and the revised SPM OR-1. An AI should therefore be compliant with those requirements relating to the development of its operational resilience framework by 31 May 2023, and those relating to the implementation of the framework no later than 31 May 2026.

31 May 2022 Click here

Please see the HKMA’s new SPM module OR-2 on “Operational Resilience” dated 31 May 2022 here.

Please see the HKMA’s revised version of the SPM module TM-G-2 on “Business Continuity Planning” dated 31 May 2022 here.

2 100% Personal Loan Guarantee Scheme to Receive Applications from Affected Individual Landlords

Starting from 6 May 2022, the 100% Personal Loan Guarantee Scheme (PLGS) will receive loan applications from individual landlords affected by rental enforcement moratorium. 

The Temporary Protection Measures for Business Tenants (COVID-19 Pandemic) Ordinance (the Ordinance) came into effect on 1 May 2022 to provide temporary protection for business tenants in specified premises whose businesses are hard hit by the fifth wave of the COVID-19 pandemic. The Ordinance imposes a moratorium to prohibit landlords from taking certain actions in respect of their business tenants of specified sectors for failing to settle rent on schedule for a specified short period. In this connection, the Government has announced earlier the provision of interest-free loans under the PLGS to affected individual landlords who live off rental income from specified business premises they hold.

The loan application period will last until 31 October 2022.

Eligibility for PLGS in connection to the Ordinance

Eligible landlords have to be Hong Kong residents aged 18 or above, who legally and beneficially own premises which are used wholly or primarily as specified premises as defined under the Ordinance, live off rental income but have been affected by rental enforcement moratorium, and can demonstrate a temporary loss of monthly rental income of at least 20% from the specified premises for at least one month during the period from 1 January 2022 to the end of the protection period for business tenants specified in the Ordinance. Eligible applicants may receive a loan amount of up to three times the monthly rent receivable in respect of their specified premises, subject to a ceiling of HK$100,000. The maximum repayment period is five years, with an option of repayment holiday for the first six months to alleviate the immediate repayment burden of the borrowers.

Participating Lenders

11 participating lenders will be ready to receive applications from affected individual landlords from 6 May 2022 onwards. They include Bank of China (Hong Kong) Limited, The Bank of East Asia, Limited, China CITIC Bank International Limited, China Construction Bank (Asia) Corporation Limited, Chiyu Banking Corporation Limited, Dah Sing Bank, Limited, Hang Seng Bank, Limited, The Hongkong and Shanghai Banking Corporation Limited, Nanyang Commercial Bank, Limited, Shanghai Commercial Bank Limited, and Standard Chartered Bank (Hong Kong) Limited.

6 May 2022 Click here

More information, including the list of participating lenders and their enquiry hotlines, will be available on the PLGS webpage here.

For more information on this new Ordinance from the perspective of landlords and tenants, please refer to Mayer Brown’s Legal Update dated 3 May 2022 here.

For more information on this new Ordinance from the perspective of lenders, please refer to Mayer Brown’s Legal Update dated 5 May 2022 here.

3 100% Personal Loan Guarantee Scheme

The Temporary Protection Measures for Business Tenants (COVID-19 Pandemic) Ordinance came into effect on 1 May 2022 to provide temporary protection for business tenants in specified premises whose businesses are hard hit by the fifth wave of the COVID19 pandemic. The Ordinance imposes a moratorium to prohibit landlords from terminating the tenancy, suspending the provision of services, or taking other related legal actions against their business tenants of specified sectors for failing to settle rent on schedule for a specified short period. In this connection, the Government has announced the provision of interest-free loans of up to three times the monthly rent under the 100% Personal Loan Guarantee Scheme (PLGS), subject to a ceiling of HK$100,000 per individual, to provide support to affected individual landlords who live off rental income from specified business premises they hold. HKMC Insurance Limited being the scheme administrator of the PLGS has been liaising with participating authorized institutions on improvements to the existing arrangement of the PLGS to allow the provision of loans to affected individual landlords. 

The HKMA confirmed that the regulatory and reporting treatments, their expectations on credit assessment and approval etc., in respect of PLGS loans granted by participating authorized institutions to eligible individual landlords will follow those set out in our circular letter of 20 April 2021 on this subject.

3 May 2022 Click here 

Please see the HKMA’s circular on 100% Personal Loan Guarantee Scheme dated 20 April 2021 here.

The above circular has been covered in item 22 below.

For more information on this new Ordinance from the perspective of landlords and tenants, please refer to Mayer Brown’s Legal Update dated 3 May 2022 here.

For more information on this new Ordinance from the perspective of lenders, please refer to Mayer Brown’s Legal Update dated 5 May 2022 here.

4 Temporary Protection Measures for Business Tenants (COVID-19 Pandemic) Ordinance (“Ordinance”)

The HKMA published this circular to draw attention to the passage of the Temporary Protection Measures for Business Tenants (COVID-19 Pandemic) Bill by the Legislative Council on 28 April 2022, and to provide guidance on the steps that authorized institutions (AIs) should take to comply with the Ordinance. 

Implications on AIs

As an initiative announced by the Financial Secretary in this year’s Budget, the Ordinance aims to mitigate the impact of COVID-19 on business tenants of certain premises. The Ordinance bars landlords from taking certain actions against their tenants for failure to pay rent for a protection period (generally three months from the commencement of the Ordinance). To support landlords facing cashflow difficulties as a result of the rental enforcement moratorium, the Ordinance correspondingly provides for a period within which a lender (including an AI), which has provided a loan secured by such (tenanted) premises (“secured loan”), is barred from taking certain actions in respect of a repayment default where certain conditions are satisfied. 

Contravention of the prohibition amounts to an offence and the lender will be liable to a fine on conviction.

The Ordinance ceases to apply if the lender has entered into a written agreement with the landlord during the protection period that provides for forbearance in respect of the repayment schedule for, or the amount of any repayment of, the loan secured by such (tenanted) premises. 

Cases where AIs are prohibited from taking enforcement actions

The Ordinance prohibits AIs and other lenders from taking specified enforcement actions in relation to the secured loan where: 

(a) the tenant fails to pay the rent and the landlord is debarred by the rental enforcement moratorium provisions in the Ordinance from taking action against the tenant; 

(b) there is a default in payment of the secured loan between 1 January 2022 (or, if an underlying tenancy only comes within the scope of the Ordinance during the protection period, the date upon which the Ordinance becomes applicable) and the end of the protection period (unless the rental enforcement moratorium provisions of the Ordinance cease to apply earlier in a given case); and 

(c) the landlord can reasonably establish that the tenant’s failure to pay the rent and the rental enforcement moratorium imposed by the Ordinance are the sole reason or a significant reason for the landlord’s inability to avoid a repayment default. 

Types of prohibited enforcement actions

The prohibited enforcement actions include, among others, suing for repayment, taking possession of the property, petitioning for the bankruptcy of the landlord, and making demand against the landlord under any other right of recourse as a result of the repayment default triggering any contractual cross-default clause. Any pending action by the lender for a payment default from 1 January 2022 will be stayed whilst the rental enforcement moratorium is in effect. 

HKMA’s expectations of AIs

As stated in the HKMA’s circular of 23 February 2022, AIs are expected to play their part in assisting the delivery of Government initiatives announced in the Budget to support the community facing temporary financial difficulties. Accordingly:

(a) AIs should study the Ordinance carefully and be mindful of the applicable legal requirements when dealing with any affected landlords (which, where specified by the Ordinance, will include obligors, guarantors and other sureties). 

(b) Specifically, the HKMA would expect and would strongly encourage AIs to waive any penalties or late charges incurred by the landlords as a result of a failure of payment protected by the Ordinance. 

(c) Likewise, in such circumstances, the HKMA would expect that, whilst interest may continue to be accrued on the unpaid principal amount, interest would not be accrued on unpaid interest. AIs should be prepared to extend the loan tenor correspondingly if they are so requested. 

(d) AIs should also refrain from any actions in respect of loan covenant breaches by customers as a result of the rental enforcement moratorium. 

(e) Pre-approved Principal Payment Holiday Scheme (PPPHS)

(i) In addition to complying with the Ordinance, the HKMA continues to expect AIs to offer credit relief, on the basis of the PPPHS, to landlords encountering cashflow problem where appropriate. 

(ii) At present, the PPPHS already covers smaller corporate borrowers (i.e. corporates with annual sale turnover of no more than HK$800 million) which have outstanding loans secured by properties. For these customers which encounter repayment difficulty as a result of the Ordinance, AIs should assist them in understanding the protection afforded by the Ordinance and the relief available under the PPPHS. In cases where customers consider the PPPHS to be more suitable for their circumstances and decide to take up the relief thereunder, AIs should advise them whether the protection afforded by the Ordinance will cease by virtue of section 4 of the Ordinance. Section 4 of the Ordinance states that once a written agreement is entered into during the protection period for forbearance in relation to the timing or amount of repayments of a relevant secured loan, the Ordinance ceases to apply. AIs should seek legal advice to ascertain whether their existing processes and documentation in relation to the PPPHS constitute a “written agreement” within the meaning of section 4 of the Ordinance. 

(iii) AIs should refer to the HKMA’s earlier circulars on PPPHS in handling applications by eligible corporate landlords. As in the past, the PPPHS operates on an opt-in basis. AIs need not issue individual notifications to eligible customers. They should handle each eligible application on a pre-approved basis. 

(iv) The HKMA expects AIs to offer the same treatment under the PPPHS to landlords affected by the Ordinance who are individuals. In other words, the credit relief available under the PPPHS should be offered to these landlords if they so request. As for larger corporate landlords falling outside of the PPPHS which face repayment difficulty as a result of the Ordinance, AIs should adopt a sympathetic attitude and identify, in consultation with their customer, a feasible solution consistent with prudent risk management principles. 

(f) Making reference to the PPPHS, non-repayment of debt covered by the Ordinance will not by itself result in a loan being downgraded, nor will it cause the loan to be categorised as “rescheduled” as long as the terms of the loan remain commercial. That said, AIs should continue to recognise and classify loans of customers which are unable to meet the rescheduled payments in a timely manner, referencing the HKMA’s Guideline on Loan Classification System, and to make adequate provisions as and when needed. The HKMA will collect from AIs relevant statistics to monitor compliance with the requirements in this circular.

29 April 2022 Click here 

Please see the HKMA’s circular on the Pre-approved Principal Payment Holiday Scheme dated 23 February 2022 here.

The above circular has been covered in item 15 below.

For HKMA’s Guideline on Loan Classification System published on 2 September 1994, please see here.

 

5 Facilitative Measures for Reactivation of Dormant or Suspended Mainland Bank Accounts under COVID-19 Pandemic 

The HKMA has received feedback from members of the public that their bank accounts maintained on the Mainland (“Mainland bank accounts”) have become dormant or have been suspended for various reasons, and they are facing difficulties in reactivating their Mainland bank accounts by visiting the banks’ branches on the Mainland in person due to the travel restrictions amid the COVID-19 pandemic situation. The situation is becoming more prevalent over time, and this may create significant hardships to the customers concerned. It will not be conducive to the convenient flow of people, goods and funds between Hong Kong and the Mainland, including but not limited to the Guangdong-Hong Kong-Macao Greater Bay Area. 

HKMA’s Recommendations for AIs

Having communicated with the relevant Mainland authorities, the HKMA strongly encourages authorized institutions (“AIs”) to introduce facilitative measures to assist these affected customers to reactivate their Mainland bank accounts, especially during the current pandemic situation for the benefit of the community. In response to some questions from AIs on regulatory aspects of such facilitative measures, this circular provides clarifications for AIs in the offering of assistance to the affected customers. 

Where Mainland banks are AIs

In the case where the relevant Mainland bank is already an AI, facilitative measures to reactivate Mainland bank accounts will not have bank licensing issue or concern on the establishment and maintenance of local representative offices under the Banking Ordinance. AIs should have flexibility in implementing facilitative measures.

Where Mainland banks are not AIs

In the case where the relevant Mainland bank is not an AI, the HKMA is of the view that where the AI, in offering administrative assistance to affected customers to reactivate their Mainland bank accounts, acts according to such customers’ instructions and acts on such customers’ behalf (instead of acting as a representative or an agent of the relevant Mainland bank in Hong Kong, or soliciting customers for the relevant Mainland bank), the offering of such assistance by the AI to the affected customers will not of itself render the relevant Mainland bank to have established or maintained a local representative office in Hong Kong. 

Moving Forward

AIs are encouraged to implement facilitative measures as soon as feasible to assist affected customers under the current pandemic situation, including adopting financial technology solutions, having regard to the applicable laws and regulatory requirements, including those on the Mainland

14 April 2022 Click here   6 Government relaunches subscription arrangement for retail green bond 

The Government announced on April 14 the relaunch of the subscription arrangement for the government retail green bond, for which the issuance was previously postponed due to the epidemic situation.

According to the press release published by HKMA, the Financial Secretary, Mr Paul Chan, said, “As the fifth wave of the epidemic gradually subsides, we are relaunching the subscription arrangement of the inaugural retail green bond and combining the issuance targets of the last and the current financial years, so as to minimise issuance costs and administrative work. Having considered the rising interest rates in the market, we have decided to increase the minimum interest rate of this retail green bond so as to provide the public with a green investment choice with a steady return.”

Details regarding the Government Retail Green Bond

The target issuance size of this retail green bond is HK$15 billion. The Government may further increase the issuance size to a maximum of HK$20 billion having regard to market conditions. As set out in the Government’s Green Bond Framework, the proceeds of green bonds will be credited to the Capital Works Reserve Fund to finance or refinance green projects that provide environmental benefits and support the sustainable development of Hong Kong (see Annex). The Government will provide information on the allocation of the proceeds and expected environmental benefits of green projects on an annual basis.

The bond will have a tenor of three years. Bond holders will be paid interest once every six months at a rate linked to inflation in Hong Kong, subject to a minimum rate of 2.5 per cent.

Subscription Period and Subscription Channels

The subscription period of the retail green bond will start from 9am on April 26 and end at 2pm on May 6. Hong Kong residents may apply for the retail green bond through a placing bank, a securities broker or the Hong Kong Securities Clearing Company Limited.

A Government spokesman noted that, to facilitate the subscription of the retail green bond and provide more options of subscription channels, the issuance has retained the various channels adopted for government retail bonds in the past. However, the Government calls on the public to subscribe for the retail green bond through online or telephone channels if possible, which not only supports environmental protection and reduces paper consumption, but also helps reduce social contact.

Issuance and Listing of the Government Retail Green Bond

The retail green bond will be issued on May 18 and listed on the Stock Exchange of Hong Kong on the following business day (May 19). It can be traded in the secondary market afterwards.

The Annex provides the nine categories of eligible projects under the Government’s Green Bond Framework. 

14 April 2022 Click here

For the nine categories of eligible projects under the Government’s Green Bond Framework, please refer to the Annex here.

Please see the HKMA’s press release sharing the Government’s announcement of the postponement of retail green bond offering dated 26 February 2022 here.

The above press release has been covered in item 12 below.

7 100% Personal Loan Guarantee Scheme Enhancements to Take Effect

According to this press release published by HKMA, HKMC Insurance Limited announced that enhancements to the 100% Personal Loan Guarantee Scheme (PLGS) will take effect from 19 April 2022 (Tuesday).

The Financial Secretary announced in the 2022-23 Budget that the application period of the PLGS will be extended to end-April 2023. The maximum loan amount per borrower will be increased from six times to nine times the average monthly income during employment, subject to a ceiling of HK$100,000 (originally HK$80,000). In addition, the maximum repayment period under the PLGS will be extended from six years to 10 years, and the principal moratorium arrangement will be extended from 12 months to 18 months. 

14 April 2022 Click here 

Details of PLGS is available on the official webpage here.

For the previous update on PLGS, please refer to HKMA’s circular “Enhancements to the 100% Personal Loan Guarantee Scheme” dated 23 February 2022 here.

The above circular has been covered in item 14 below.

8 SME Financing Guarantee Scheme Enhancements to Take Effect 

The HKMA issued a Circular dated 30 March 2022 regarding the HKMC Insurance Limited’s announcement that enhancements to the SME Financing Guarantee Scheme (SFGS) will take effect from 1 April 2022 (Friday).

To further alleviate the cash flow pressure of small and medium-sized enterprises in the time of the pandemic, the Financial Secretary announced in the 2022-23 Budget that the maximum loan amount per enterprise under the Special 100% Loan Guarantee will be raised from the total amount of employee wages and rents for 18 months to that for 27 months, subject to a ceiling of HK$9 million (originally HK$6 million), and the maximum repayment period will be extended from eight years to 10 years. Eligible enterprises should have been operating for at least three months as at 31 March 2022, and have suffered at least a 30% decline in sales turnover in any month since February 2020 compared with the monthly average of any preceding quarter from January 2019 to March 2022.

In addition, the principal moratorium arrangement for the 80% Guarantee Product, the 90% Guarantee Product and the Special 100% Loan Guarantee of the SFGS will be extended by six months to a maximum of 30 months in total. An option for borrowers to resume making partial principal repayment for one year will be provided, allowing borrowers to resume normal repayment gradually if they are willing and capable.

The application period of the SFGS has been extended to 30 June 2023. 

30 March 2022 Click here 

For details regarding SFGS, please see here.

For the previous update on SFGS, please refer to HKMA’s circular “ Enhancements to the SME Financing Guarantee Scheme” dated 23 February 2022 here.

The above circular has been covered in item 13 below.

9

OTC Derivatives Trade Repository of the HKMA

Updated Technical Specifications for Reporting

The HKMA announced through a notice dated 29 March 2022 that a revised version of the Administration and Interface Development Guide (“AIDG”) – version 2.0 for reporting is published to update the technical specification under the over-the-counter (OTC) derivatives trade repository of the HKMA (“HKTR”). The AIDG version 2.0 (see attachments to the notice) will start to apply from 19 December 2022. Updates to coding schemes to cover “Proprietary rates” will be postponed to 19 December 2022 as well due to the pandemic.

Key Changes in AIDG version 2.0

With reference to the Proposed Updates to the Technical Specifications for OTC Derivatives Trade Reporting communicated by local regulatory authorities to the reporting entities dated on 11 October 2021, corresponding key changes are made in the revised AIDG, including 

(i) making available the “Global Unique Transaction Identifier” (Global UTI) related data fields’ in anticipation of the global implementation of UTI, 

(ii) enhancing the Equity templates to address market feedback and cater to regulatory needs, 

(iii) amending data field descriptions to accommodate the mandating of reporting specified field values and product types. 

The revised AIDG also covers updates of coding schemes supported in the HKTR reporting templates and corresponding changes in some business validation rules.

Postponement of Implementing Updates to Coding Schemes Amid Covid-19

Amid the operational challenges reporting entities may face under the current pandemic situation, the implementation date of updates to coding schemes to cover “Proprietary rates” will be postponed from the originally scheduled 31 March 2022 to 19 December 2022.

Existing Updates and Updates to Come

Reporting entities are reminded to read the proposed updates made by local regulatory authorities and the revised AIDG for the details of the changes and review their obligation to report all transactions involving the updates supported by the HKTR. Further to this, an updated Operating Procedures for Hong Kong Trade Repository — User Manual for Participants will be published in due course for the enhanced display of the user interface and system reports of the HKTR system. 

Simulated Reporting for AIDG version 2.0

The HKTR will make available a testing environment from October 2022 for interested reporting entities to simulate reporting on the changes made in the AIDG on a voluntary basis.

Attachments to the notice provides details regarding AIDG version 2.0

29 March 2022 Click here  For attachments providing details regarding AIDG version 2.0, please see here. 10 Extended deadlines for regulatory submissions and other exceptional arrangements under Covid-19 pandemic 

In light of the latest wave of the Covid-19 pandemic, the HKMA issued a Circular dated 7 March 2022 to (i) extend or temporarily suspend certain deadlines for regulatory submissions; and (ii) extend the deadline for completion of Continuous Professional Training (CPT) hours.

The HKMA is aware that amid an upsurge of infections, the banking industry has stepped up efforts to implement special work arrangements and safety measures to protect staff and customers while ensuring an uninterrupted provision of essential banking services. The operational challenges authorized institutions (AIs) face under the circumstances may increase further in the short term as the Hong Kong community makes a concerted effort to combat the pandemic with city-wide measures, including a universal testing exercise, to bring it under control. 

Extension of Deadline or Temporary Suspension of Regulatory Submissions

To enable AIs to focus resources on essential operations, the HKMA considers it appropriate to provide flexibility in certain submissions required of them during this exceptional period. These cover various surveys, banking returns, self-assessments, consultations, etc. which AIs are required to make submissions to the HKMA within specified periods. The way the HKMA proposes to exercise flexibility in each case (i.e. either by way of an extension of submission deadline, or temporary suspension of submission) is set out at Annex 1 to the Circular. For upcoming consultations, the HKMA is prepared as far as appropriate to allow the industry to provide feedback within a more accommodative time frame. 

Relatedly, the HKMA issued a Circular on 7 February 2020 informing AIs of its preparedness to allow flexibility for those encountering pandemic-related operational difficulties in meeting the deadlines for lodging documents with the HKMA under section 60 of the Banking Ordinance (BO) or in making disclosures under the Banking (Disclosure) Rules. A copy of the Circular is attached as Annex 2 to the Circular. The HKMA reiterates that the same principles for allowing flexibility as set out in that Circular remain applicable. Any AI anticipating difficulties is requested to approach the HKMA as soon as practicable for discussion.

Extension of Deadline for Completing CPT Hours 

In respect of relevant individuals (including executive officers) within the meaning of the BO who are originally required to pass regulatory examinations or have undertaken to complete additional CPT hours on or before 31 May 2022, the HKMA allows the same extension of three calendar months as that provided by the SFC for licensed individuals. Application for time extension to the HKMA is not required. 

The HKMA will continue to closely monitor the development of the pandemic situations and collaborate with the industry in maintaining the safety and soundness of the banking system. The HKMA is using its supervisory tools flexibly in this period and reiterates the importance of risk-based approach.

7 March 2022  Click here 

Appendix 1 – Extended deadlines for regulatory submissions

Appendix 2 – “Requirements under section 60 of the Banking Ordinance (Cap. 155) and disclosure requirements under the Banking (Disclosure) Rules (Cap. 155M)” issued by the HKMA on 7 February 2020

(covered in item 51 below)

For the SFC’s extension of deadline for completing CPT Hours, please refer to questions 1 and 2 of the FAQs on “Licensing related matters in light of the COVID-19 pandemic” last updated on 2 March 2022 here.

(also covered in item 23 of the SFC circulars/guidelines above)

11 Circular Issued by the Insurance Authority (“IA”) on Further Facilitative Measures under the COVID-19 Pandemic In response to the “Further Facilitative Measures under the COVID-19 Pandemic” issued by the IA on 4 March 2022 (the “IA Circular”; also covered in item 4 of the IA circulars/guidelines below), the HKMA issued a circular to set out the expectations of the HKMA on the adoption of the further facilitative measures by authorized institutions (“AIs”).

Extension of Phase 2 of the Temporary Facilitative Measures (“TFM”) and Distribution of in-scope TFM products via Virtual Onboarding (“VO”) Sandbox 

AIs may continue to adopt the TFM outlined in the circular “Phase 2 of the temporary facilitative measures to tackle the outbreak of COVID-19” issued by the IA on 27 March 2020 for their non-face-to-face (“non-F2F”) distribution of the in-scope TFM products until 30 September 2022.

For AIs that distribute long term insurance products via video-conferencing tools under the InsurTech sandbox of the IA (i.e. the VO Sandbox), in distributing in-scope TFM products under TFM (i.e. all the requirements in relation to the adoption of TFM are met), the requirement of end-to-end recording of every video conference session can be dispensed with according to the IA Circular.

For the avoidance of doubt, the clarifications and reminder set out in the circular entitled “Circular Issued by the Insurance Authority (“IA”) on Phase 2 of the Temporary Facilitative Measures (“TFM”) to Tackle the Outbreak of COVID-19” issued by the HKMA on 27 March 2020 remain applicable. In particular, AIs should continue to comply with the audio-recording requirements for sale of annuity insurance products in selling Qualifying Deferred Annuity Policies.

Extension of the VO Sandbox to all long term insurance products 

As communicated with the industry earlier, following the issuance of the new supervisory requirements related to Investment-Linked Assurance Scheme (“ILAS”) by the Securities and Futures Commission and the IA on 1 November and 28 December 2021 respectively, the HKMA aims to set out the corresponding requirements on AIs’ selling process through a revised guideline, and aims to consult the industry later this year. AIs that intend to distribute any ILAS product, including Protection Linked Plan, should provide prior notification to and discuss with the HKMA before launching such product. 

Fast track for VO Sandbox applications 

AIs that intend to distribute long term insurance products via video conferencing tools can continue to submit VO Sandbox application to the IA through their appointing insurers. The HKMA will work with the IA in reviewing VO Sandbox applications involving AIs.

4 March 2022 Click here Please see “Further Facilitative Measures under the COVID-19 Pandemic” issued by the IA on 4 March 2022 (also covered in item 4 of the IA circulars/guidelines): here

Please also see “Circular Issued by the Insurance Authority (“IA”) on Phase 2 of the Temporary Facilitative Measures (“TFM”) to Tackle the Outbreak of COVID-19” issued by the HKMA on 27 March 2020: here

 

12 Government announces postponement of retail green bond offering  The Government announced that in view of the latest developments of COVID-19, it has decided to postpone the launch of the inaugural retail green bond offering, for which the subscription period was originally scheduled for March 1 to 11. Subject to the development of the COVID- situation, the Government will relaunch the subscription arrangement for the retail green bond as soon as possible. Further details will be announced in due course.  26 February 2022 Click here    13 Enhancements to the SME Financing Guarantee Scheme 

On 23 February 2022, the Financial Secretary announced in the 2022-23 Budget that there will be enhancements to the SME Financing Guarantee Scheme (“SFGS”). The enhancements are as follows:

  1. The application period for the 80% Guarantee Product, the 90% Guarantee Product and the Special 100% Loan Guarantee of the SFGS will be extended to 30 June 2023.
  2. The maximum loan amount per enterprise under the Special 100% Loan Guarantee will be raised from the total amount of employee wages and rents for 18 months to that for 27 months, subject to a ceiling of HK$9 million (originally HK$6 million), and the maximum repayment period will be extended from eight years to ten years.
  3. Having regard to the HKMA and the banking sector’s further extension and new partial principal repayment option under the Pre-approved Principal Payment Holiday Scheme (please see “Remarks”), HKMC Insurance Limited (“HKMCI”) will follow suit with the following enhancements to the principal moratorium arrangement under the SFGS:
    • The principal moratorium arrangement under the SFGS will be extended from six months to 30 months, and the application period for principal moratorium will be extended to end-December 2022.
    • Borrowers will be given the option to resume making partial principal repayment for one year if they are willing and capable. Whether a borrower chooses the principal moratorium arrangement or the partial principal repayment option, the loan tenor and the guarantee period will be extended accordingly.

The HKMCI will follow up on the implementation details with lending institutions, and strive to roll out the enhanced measures in 1.5 months. Effective date and details will be further announced. 

23 February 2022 Click here 

Please see the HKMA’s circular on the Pre-approved Principal Payment Holiday Scheme dated 23 February 2022 here

The above circular has been covered in item 15 below.

14 Enhancements to the 100% Personal Loan Guarantee Scheme 

On 23 February 2022, the Financial Secretary announced in the 2022-23 Budget that there will be enhancements to the 100% Personal Loan Guarantee Scheme (“PLGS”). The enhancements are as follows:

  1. The application period of the PLGS will be extended to end-April 2023.
  2. The maximum loan amount per borrower will be increased from six times to nine times the average monthly income during employment, subject to a ceiling of HK$100,000 (originally HK$80,000). In addition, the maximum repayment period under the PLGS will be extended from six years to ten years, and the principal moratorium arrangement will be extended from 12 months to 18 months.

The HKMCI will follow up on the implementation details with lending institutions, and strive to roll out the above measures in 1.5 months. Effective date and details will be further announced. Before the measures come into effect, those in need may approach lending institutions to make applications based on the existing terms. 

23 February 2022 Click here   15 Further extension of the Pre-approved Principal Payment Holiday Scheme 

The HKMA issued a circular dated 23 February 2022 (i) extending the Pre-approved Principal Payment Holiday Scheme (“Scheme”) by six months; and (ii) introducing a one-year partial principal repayment option (“Option”) which will be offered to those customers who prefer to resume principal payment gradually. Given the severity of the prevailing wave of COVID infections, the HKMA calls on AIs to continue to adopt a sympathetic attitude to customers in temporary financial difficulties and render assistance to them insofar as it is consistent with prudent risk management principles. This is intended to avoid an abrupt curtailment of credit to the SME sector and would be in the best interest of the banking industry as a whole. The extension of the Scheme and the introduction of the Option have received the unanimous support of the 11 major lenders of the Mechanism. The HKMA expects all AIs to offer the same treatment to their corporate customers covered by the Scheme. 

Further extension of the Pre-approved Principal Payment Holiday Scheme

During the past few months, the HKMA and the Banking Sector SME Lending Coordination Mechanism (“Mechanism”) explored the possibility of gradually exiting the Scheme. However, due to the recent resurgence of COVID-19 cases, the HKMA and the Mechanism considered a change in plan and decided to further extend the Scheme by six months. 

Principal payments of all loans of eligible corporate borrowers falling due between 1 May 2022 and 31 October 2022 should be deferred by six months (except for repayments of trade loans, which should be deferred by 90 days). The deferment applies whether or not a loan has previously been on a principal payment holiday.

Similar to previous rounds of Scheme extensions:

AIs need not issue individual notifications to eligible customers regarding the six-month extension of the Scheme. Corporate customers in need of relief should be advised to contact their lending institutions. AIs should handle each eligible customer’s case on a pre-approved basis. AIs may seek updated financial or business information from customers, particularly those who have already been granted multiple extensions of payment holidays. All other terms of the Scheme set out in the Annex to the HKMA’s circular on 17 April 2020 should continue to apply.

  • For a loan which has been extended for 540 days or more successively since it was first drawn down (or a trade loan which has been extended for 270 days or more successively since it was first drawn down), AIs can adopt a flexible approach and consider on a case-by-case basis whether other forms of relief (including but not limited to full principal payment) are more suitable to help the customers ride out the current difficulties, subject to prudent risk management principles.
  • AIs may require a customer to settle trade facilities which are self-liquidating in nature if the customer receives the underlying payment during the extended deferment period
  • For revolving facilities that are due for credit review between 1 May 2022 and 31 October 2022, AIs should not adjust downward the existing facility limits within six months from the review dates.

Partial principal repayment option 

The HKMA and the Mechanism note that some customers may be financially capable and willing to resume some principal repayment in exchange for greater certainty to their future repayment schedule. AIs are therefore recommended to offer customers an option to start to resume partial repayment of the original principal repayment amount (i.e. the original payment schedule when the customer first joined the Scheme) over a period of one year. Specific treatments are recommended for different types of loans: 

  • For instalment loans (e.g. mortgage loans and commercial vehicle loans), customers may start to repay 20% of the original principal repayment amount within one year. The loan tenor should generally be extended correspondingly. The same treatment should be applicable to commercial vehicle loans taken out by personal customers. The HKMA and the Mechanism will review the arrangement for principal repayment beyond one year at a suitable juncture.
  • For trade facilities, loans with bullet payment falling due within one year, and outstanding balances of revolving facilities, customers may repay the amount due to be settled by regular instalments (e.g. quarterly or monthly) over a period of two years. For trade facilities which are self-liquidating in nature, AIs may require the loan to be settled when the underlying payment has been received by the customer.

For the avoidance of doubt, loans which have been extended for 540 days or more successively since the first drawdown (or trade loans which have been extended for 270 days or more successively since the first drawdown) are eligible for the Option.

The HKMA and the Mechanism encourage AIs to approach their customers participating in the Scheme to ascertain their interest in the Option. AIs should emphasize to customers that taking up the Option is entirely voluntary for the customers. The HKMA points out that taking part in the full principal payment deferment or the Option will not by itself result in a loan being downgraded, nor will it cause the loan to be categorised as “rescheduled” as long as the terms of the deferment are commercial. That said, AIs should continue to recognise and classify loans of customers which are unable to meet the rescheduled payments in a timely manner, with reference to the HKMA’s Guideline on Loan Classification System, and to make adequate provisions as and when needed. 

23 February 2022 Click here

Please see the HKMA’s circular dated 17 April 2020 here.

Please see the Annex to the HKMA’s circular dated 17 April 2020 here.

The above circular has been covered in item 43 below. 

16 COVID-19 Vaccination and “Vaccine Pass” Arrangements 

The HKMA issued a Circular dated 18 February 2022 encouraging AIs to (i) implement “vaccine pass” arrangements and (ii) encourage their staff to take the third dose of COVID-19 vaccination.

Implementation of “vaccine pass” arrangements

In light of the recent surge in COVID-19 infections involving new, highly transmissible strains, the HKMA advises AIs to step up their precautionary measures for protecting their staff and customers and ensuring the uninterrupted provision of essential banking services. Drawing reference from the “vaccine pass” arrangements by the Government and financial regulators for staff entering the workplace, the HKMA strongly encourages AIs to consider implementing similar arrangements appropriate to their own settings and operational needs at their premises. Under such arrangements:

  • Staff should be required to present proof of vaccination for at least the first dose of COVID-19 vaccine before entering the workplace.
  • Exemption may be granted to staff who are unfit for vaccination due to medical conditions, supported by a valid medical certificate.
  • Exempted staff should continue to be required to undergo regular testing for COVID-19.

AIs are required to inform the HKMA within 2 weeks from the date of the circular (i.e. by 4 March 2022) whether they will implement a “vaccine pass” arrangement and the planned date of implementation. If an AI decides not to implement a “vaccine pass” arrangement, it should provide the HKMA with details of its considerations in reaching this decision.

Third dose of COVID-19 vaccination

HKMA acknowledges that the Hong Kong banking industry has made substantial efforts to promote COVID-19 vaccine uptake in the workplace, strengthening the protection of bank staff and customers and facilitating better business continuity planning. According to the latest information shared by AIs with the HKMA, over 90 percent of bank staff have received at least one dose of COVID-19 vaccine.

AIs are required to strongly encourage eligible staff to take the third dose of COVID-19 vaccine. AIs should provide adequate facilitating measures (e.g. vaccination leave arrangement) for staff to receive COVID-19 vaccination. AIs should also pay close attention to the development of the COVID-19 epidemic situation and conduct timely assessments of the need to adjust their workplace safety measures, having regard to the Government’s latest guidance on COVID-19 prevention and control measures. 

18 February 2022  Click here    17 Repayment of Trade Facilities Deferred by the Banking Sector for Another 90-day Period 

The HKMA and the Banking Sector SME Lending Coordination Mechanism (“Mechanism”) announced a further 90-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme (“Scheme”). 

The decision to extend the repayment of trade facilities under the Scheme for 90 days until the end of April 2022 was made in light of the rapid spread of the COVID-19 variant around the world which creates uncertainties for economic recovery and the ongoing global supply-chain disruptions which put pressure on corporates hard-hit by the pandemic. 

Similar to previous extensions:

  • Corporate customers participating in the repayment deferment for trade facilities under the Scheme, if in need, can extend trade facilities falling due between February and April 2022 for another 90 days.
  • Eligible corporate customers can also apply for a 90-day extension of trade facilities drawn down from November 2021 to end of January 2022.
  • For facilities which are self-liquidating in nature, 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 draw-down, banks can adopt a flexible approach and consider on a case-by-case basis whether other forms of relief are more suitable to help the customers, subject to prudent risk-management principles. 

The Mechanism is due to expire at the end of April 2022 and, going forward, HKMA and the Mechanism are considering ways to strike a balance between banks’ need for prudent risk management and supporting corporates that are still hard-pressed by the pandemic.

11 January 2022  Click here 

Please see the HKMA’s circular dated 5 August 2020 here.

The above circular has been covered in item 32 below.

18 COVID-19 Vaccination Programme 

The HKMA issued a circular dated 28 October 2021 requiring AIs to strongly encourage ALL staff to get vaccinated as soon as practicable. Staff who have not received a first dose of COVID-19 vaccine by 30 November 2021 or are unfit to receive vaccination due to medical conditions should undergo effective testing for COVID-19 every two weeks.

In 1 June 2021, the HKMA issued a circular requiring all AIs to strongly encourage staff performing client-facing roles or critical support functions (“designated staff”) to receive COVID-19 vaccinations, and to make arrangements for designated staff who have not been vaccinated to undergo effective testing for COVID-19 every two weeks. The measures aimed to strengthen the protection of bank staff and customers against the risk of COVID-19 and to enhance the business continuity planning of AIs. 

Since the 1 June 2021 Circular, the COVID-19 vaccination rate of designated staff has increased steadily. The latest information shared by AIs with the HKMA shows that over 80% of designated staff have received at least one dose of COVID-19 vaccine. That said, the HKMA notes that more infectious variants of COVID-19 have spread rapidly in some overseas jurisdictions. 

Taking into account the potential for severe business disruption to banking operations in the event of another outbreak, and the experience and practices of other major markets, the HKMA considers it essential for AIs to expand the scope of their vaccination and regular testing arrangements to all staff. AIs should provide adequate facilitating measures for staff to receive vaccination, such as pre-vaccination health checks sponsored by the AI, time off work to get vaccinated and extra days of leave.

28 October 2021  Click here 

Please see the HKMA’s circular on 1 June 2021 here.

The above circular has been covered in item 21 below.

19 Further extension of the Pre-approved Principal Payment Holiday Scheme 

The HKMA issued a circular dated 21 September 2021 (i) extending the Pre-approved Principal Payment Holiday Scheme (“Scheme”) by six months; (ii) disclosing the plan for an orderly exit of the Scheme; and (iii) exploring alternative repayment arrangements for some sectors such as the transportation sector.

Further extension of the Pre-approved Principal Payment Holiday Scheme

The HKMA and the Banking Sector SME Lending Coordination Mechanism (“Mechanism”) has decided to further extend the Scheme by six months to end-April 2022. 

Principal payments of all loans of eligible corporate borrowers falling due between 1 November 2021 and 30 April 2022 should be deferred by six months (except for repayments of trade loans, which should be deferred by 90 days). The deferment applies whether or not a loan has previously been on a principal payment holiday.

For a loan which has been extended for 540 days or more successively since it was first drawn down (or a trade loan which has been extended for 270 days or more successively since it was first drawn down), AIs can adopt a flexible approach and consider on a case-by-case basis whether other forms of relief are more suitable to help the customers ride out the current difficulties, subject to prudent risk management principles. In-line with the existing terms of the Scheme:

  • For facilities which are self-liquidating in nature, AIs may require the loan to be settled by the borrower if the borrower receives the underlying payment during the extended deferment period.
  • For revolving facilities that are due for credit review between 1 November 2021 and 30 April 2022, AIs should not adjust downward the existing facility limits within six months from the review dates.

Similar to previous Scheme extensions, AIs need not issue individual notifications to eligible customers regarding the six-month extension arrangement. Corporate customers should be advised to contact their lending institutions. AIs should handle each eligible customer’s case on a pre-approved basis and may seek updated financial or business information from customers, particularly those who have already been granted multiple extensions of payment holidays. All other terms of the Scheme set out in the Annex to the HKMA’s circular on 17 April 2020 continue to apply.

The HKMA and the Mechanism are planning for an orderly exit of the Scheme

As the usage of the Scheme has dwindled to a low level on the back of steady economic recovery, the HKMA and the Mechanism consider that planning should be made for the discontinuation of the Scheme, in line with prudent risk management principles. The HKMA will engage the banking industry to discuss the appropriate exit strategy, drawing reference from experience of overseas jurisdictions which are in different stages of withdrawal from pandemic relief measures. Further details will be shared at a later date.

Alternative arrangements for alleviating cash flow difficulty in transportation sector

HKMA stresses that AIs should continue to be accommodative and actively explore alternative repayment arrangement with the borrowers, such as partial principal repayment over a longer period of time as favoured by some sectors.

Making reference to the practice of upgrading of public light buses (PLBs) to 19 seats, the Mechanism agreed that AIs should exercise greater flexibility in handling the new financing applications from taxi operators for replacing aged vehicles. The HKMA considers that AIs do not need to rigidly adhere to the 85% 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. The Mechanism further agrees that AIs should actively consider extending the maximum tenors for existing taxi and PLB loans from 25 years to 30 years, and for non-franchised buses from 7 years to 10 years, after taking into account the circumstances of individual borrowers. During consultation with the transportation sector, views were floated that, as an alternative to the six-month full principal payment holiday, AIs should offer partial repayment of principal over a longer period of time (such as 20-50% principal repayment over one to two years) which has the merit of greater certainty for the borrowers. The Mechanism encourages AIs to explore such options with their customers. The HKMA will also make reference to these suggestions when planning for the exit of the Scheme. 

21 September 2021  Click here 

Please see the HKMA’s circular on 17 April 2020 here.

Please see the Annex to the HKMA’s circular on 17 April 2020 here.

The above circular has been covered in item 43 below.

20 Repayment of Trade Facilities Deferred by the Banking Sector for Another 90-day Period

90-day deferral for trade facilities under the Pre-approved Principal Payment Holiday Scheme

The HKMA and the Banking Sector SME Lending Coordination Mechanism (“Mechanism”) announced a 90-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme (“Scheme”). 

Under the Scheme (which was covered in a previous circular (please see “Remarks”)), trade loans have been granted 90-day extension five times. Some of these loans will fall due in August 2021. The Mechanism recognised that Hong Kong’s external trade has continued to improve and the local economy is gradually recovering, however given the fluctuating pandemic situation around the world, economic recovery is still laden with uncertainties. The Mechanism therefore has agreed to further extend the repayment period of trade facilities under the Scheme for 90 days until the end of October, when the whole Scheme will expire.

Interested corporate customers may contact their banks, which in turn will handle repayment deferment requests on a “pre-approved” basis. Features for trade facilities under the Scheme are similar to previous extensions:

  • Corporate customer in need can further extend for 90 days their trade facilities falling due between August and October 2021.
  • Eligible corporate customers can apply for a 90-day extension of trade facilities drawn down from May to end-July 2021.
  • For facilities which are self-liquidating in nature, banks may require the loan to be settled when the underlying payment has been received by the customer.
  • For trade loans extended for 270 days or more cumulatively since their first draw-downs, banks can adopt a flexible approach and consider on a case-by-case basis whether other forms of relief are more suitable to help the customers, subject to prudent risk-management principles. 

When the Scheme expires at end-October, the HKMA and the Mechanism will consider the way forward, taking into account consultations with the banking industry and commercial sectors, as well as overseas practices in handling similar schemes.

15 July 2021  Click here 

Please see the HKMA’s circulars dated 5 August 2020 here

The above circular has been covered in item 32 below.

21 COVID-19 Vaccination Programme

HKMA issued a Circular urging all authorised institutions (AIs) to introduce additional effective measures to encourage all bank staff to get vaccinated. In particular, consideration should be given to following the recent practice of the Government and the HKMA of giving extra days of leave to staff who have taken both doses of the vaccine, or providing other suitable and adequate incentives for inoculation.

HKMA requires that all AIs should strongly encourage staff performing client-facing roles or critical support functions to get vaccinated. AIs should identify and draw up a list of designated staff expected to receive inoculation. The list should include, without limitation, those staff involved in branch operation, wealth management and commercial banking, who have frequent face-to-face interactions with customers, as well as those responsible for critical IT, data centre, treasury and settlement operations.

Bank staff included in the list should be requested to get vaccinated as soon as possible. Arrangements should be made for those, who have not yet been vaccinated or are unfitfor vaccination due to medical conditions, to undergo effective testing for COVID-19every two weeks. Following the advice of public health authorities, the HKMA considers that polymerase chain reaction-based nucleic acid testing using combined nasal and throat swabs is an effective test for COVID-19 for this purpose.

AIs are required to submit to the HKMA, within two weeks from the date of the Circular, a breakdown by department or function of designated staff expected to receiveinoculation. Staff included in the list should undergo the first COVID-19 test by 30June 2021 if they have not yet taken the first dose of vaccine by then.

The Circular added that promoting a high vaccination rate is a collective effort of the whole community towards the ultimate resumption of normal economic activities, and emphasized that the banking sector has an important role to play in this process and should make its contribution to safeguarding public health and bringing Hong Kong’s economy onto a steady recovery path. This would also provide the requisite foundation for Hong Kong to re-start international travel, which is crucial for maintaining Hong Kong’s status as an international financial centre.

1 June 2021  Click here  Please also see our legal update on this here.  22 100% Personal Loan Guarantee Scheme

HKMA issued a circular on 20 April 2021 in relation to the 100% Personal Loan Guarantee Scheme (PLGS) proposed in the 2021-2022 Budget. The PLGS provides a supplementary financing option for individuals suffering from cessation of main recurrent incomes from employment due to the COVID-19 pandemic.

The PLGS will be administered by HKMC Insurance Limited (HKMCI). HKMCI will rely on the professional expertise, judgment and care of participating lender institutions in conducting customer due diligence and verification of applicants’ eligibility for concessionary low-interest loans. After drawdown, the loans will be sold by the participating lender institutions to The Hong Kong Mortgage Corporation Limited (HKMC). HKMC’s purchase of the loans will be funded by the HKSAR Government. The Government has issued a letter of comfort to HKMA confirming its commitment under the PLGS.

In this circular, HKMA sets out its policy intent on the relevant regulatory treatments in respect of a loan granted by a participating authorised institution (AI) to an eligible borrower under the PLGS:

1) Regulatory and reporting treatments

Under the PLGS arrangement, an AI is considered to have an exposure to HKMC fully covered by the Government’s commitment under the PLGS. It follows that:

2) Credit assessment and approval

An AI is expected to check the eligibility of an applicant against the criteria specified under the PLGS. HKMA considers the credit risk exposure of the AI to be minimal as the loan will be transferred without recourse to HKMC shortly after it is created. Therefore, HKMA’s supervisory requirements on credit assessment and risk management set out in the SPM module CR-G-2 do not apply to loans covered by the PLGS.

Having regard to the policy intent of the PLGS is to provide some relief to members of the public over the temporary financial hardship caused by the pandemic, AIs are expected not to take any credit actions which may result in a tightening of existing credit to the borrower, on knowledge of his / her application under the PLGS. HKMA has established an arrangement with the HKMC to handle complaints and feedback received from the public about unfair treatment of borrowers under the PLGS.

Finally, HKMA reminds AIs to refer to the communications of HKMC with the AIs for details regarding disclosure in respect of consumer protection. 

20 April 2021 Click here 23 COVID-19 Vaccination Programme 

HKMA issued a circular on 24 March 2021 in relation to the territory-wide COVID-19 Vaccination Programme for Hong Kong residents. 

The key message is that it is in the interest of authorized institutions to support the Government’s vaccination drive and help prevent the spread of COVID-19 in the workplace and protect the health and safety of their staff and customers. This is to ensure that banks can operate and provide banking services to their customers without interruption given that they perform a critical financial intermediation role in the economy and provide services that are essential to the wider public interest. 

The circular provides examples of supportive measures to facilitate staff who wish to get vaccinated to do so, especially those who interact frequently with customers or perform critical functions. These examples include:

  • Disseminating information about the Vaccination Programme to staff and referring them to the Government’s dedicated website (www.covidvaccine.gov.hk) for queries they may have in relation to the COVID-19 vaccines;
  • Allowing staff to get vaccinated during working hours or implementing flexible working hours to accommodate vaccination appointments; and
  • Granting staff time off work, where necessary, to rest after vaccination. 

Authorized institutions should also monitor updates to the Vaccination Programme and related COVID-19 guidance issued by the Government, and provide relevant information to their staff with a view to encouraging vaccine uptake.

24 March 2021  Click here   24 FATF statements on “High-Risk Jurisdictions subject to a Call for Action” and “Jurisdictions under Increased Monitoring” 

HKMA issued a Circular dated 10 March 2021 on the following:

(a) FATF pause in its review process for strategic deficiencies in AML/CFT regimes

In response to the COVID-19 pandemic, the Financial Action Task Force (FATF) decided on a general pause in the review process for the list of “high-risk jurisdictions subject to a call for action”. Authorized Institutions (AIs) and Stored Value Facility (SVF) Licensees should continue to refer to the HKMA circular on “Statements issued by the Financial Action Task Force” dated 11 March 2020, in particular, applying the enhanced due diligence measures and other counter-measures in relation to Iran and the Democratic People’s Republic of Korea.

(b) Outcomes of the FATF Plenary meeting held in February 2021 

FATF member delegates discussed and reviewed various strategic initiatives and country-specific processes. In particular, the FATF is developing Guidance to help both public and private sectors in implementing new requirements to identify, assess, understand and mitigate proliferation financing risk as defined in Recommendation 1 and its Interpretive Note. The Guidance aims to assist both public and private sectors in conducting a risk assessment in the context of proliferation financing, and applying corresponding risk mitigation measures. The FATF is consulting private sector stakeholders before finalising the Guidance.

10 March 2021 

Click here
(Addressed
to AIs)

Click here 
(Addressed to SVF Licensees)

Please see HKMA’s Circular dated 11 March 2020 here.

FATF’s statement on “Jurisdictions under Increased Monitoring” can be found in here.

Outcomes of the FATF can be found in here.

25 Extension of Pre-approved Principal Payment Holiday Scheme for another 6 months 

The HKMA and the Banking Sector SME Lending Coordination Mechanism (“Mechanism”) announced that the Pre-approved Principal Payment Holiday Scheme (“Scheme”) will be extended for another six months to October 2021.

All principal payments of loans falling due between May and October 2021 by eligible corporate customers will be deferred by another six months (except for repayments of trade loans, which will be deferred by 90 days). Similar to the Scheme extension in November 2020, banks will not issue individual notifications to eligible customers regarding the deferment arrangement. Interested corporate customers may contact their banks. Deferment requests will be handled on a “pre-approved” basis. Banks may request customers to provide up-to-date operational and financial information to better understand their needs when processing their requests.

As the Scheme has been rolled out for nearly one year, in order to strike a balance between catering for the unique circumstances facing customers and the need for prudent risk management, the Mechanism has agreed that, for loans which have been extended for 540 days or more cumulatively since first being drawn down (or trade loans which have been extended for 270 days or more cumulatively since first being drawn down), banks can 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 the current difficulties.

4 March 2021  Click here

Please see the HKMA’s circulars dated 5 August 2020 here.

The above circular has been covered in item 32 below.

Please also see the HKMA’s announcement dated 2 September 2020 here.

The above announcement has been covered in item 28 below.

26 Repayment of Trade Facilities Deferred by the Banking Sector for Another 90-day Period 

90-day deferral for trade facilities under the Pre-approved Principal Payment Holiday Scheme

The HKMA and the Banking Sector SME Lending Coordination Mechanism (“Mechanism”) announced a 90-day repayment deferment for trade facilities under the Pre-approved Principal Payment Holiday Scheme (“Scheme”). 

Under the Scheme (which was covered in a previous circular (please see “Remarks”)), trade loans have been granted 90-day extension respectively in May, August and November 2020. Some of these loans will fall due in February 2021. The Mechanism has agreed that in light of the COVID-19 pandemic, corporate customers can further extend their trade facilities for another 90-day period. Eligible corporate customers can also apply for a 90-day extension of trade facilities drawn down from November 2020 to end-January 2021.

Similar to previous extensions of the Scheme, interested corporate customers may contact their banks, which in turn will handle repayment deferment requests on a “pre-approved” basis. However, it is important to note some additional features for trade facilities under the Scheme:

  • For facilities which are self-liquidating in nature, banks may require the loan to be settled when the underlying payment has been received by the customer.
  • For trade loans extended for 270 days or more cumulatively since their first draw-downs, 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 the customers (subject to prudent risk-management principles). 

Flexibility under the Scheme for customers in the transportation sector

The HKMA and the Mechanism also discussed various difficulties facing customers in the transportation sector and identified the following assistance that banks can provide:

  • Banks will be more flexible in handling new financing applications by public light bus (“PLB”) operators to finance the upgrade of their vehicles from 16 seats to 19 seats. 
  • Banks do not need to rigidly adhere to the 85% loan-to-value ratio cap (provided that prudent risk-management principles are observed) for new loans used only for the purchase of new vehicles.
  • As regards new loans granted for taxis, PLBs and other non-franchised buses, banks agreed that they would actively consider extending the maximum loan tenors for taxis and PLBs to 30 years, and the maximum loan tenors for non-franchised buses to 10 years, on a temporary basis for the next two years. 
  • Banks may provide other forms of relief to help alleviate the repayment burden of relevant commercial vehicle owners, subject to prudent risk-management principles.

The HKMA reminded banks to be sympathetic to customers who are not eligible for the Scheme to help tide them over this difficult time (while observing prudent risk-management principles).

29 January 2021  Click here 

Please see the HKMA’s circulars dated 5 August 2020 here.

The above circular has been covered in item 32 below.

27 An Update on COVID-19 and Money Laundering and Terrorist Financing risks 

HKMA published a circular to draw the attention of all Authorized Institutions (AIs) and Stored Value Facility (SVF) Licensees to the most recent update from the Financial Action Task Force (FATF) on COVID-19-related money laundering / terrorist financing (ML/TF) risks (please find the link to FATF’s update in Remarks column). The update highlights developments since FATF’s previous reports and provide details on how criminals continue to attempt to exploit the global financial systems, with case studies (including some provided by Hong Kong), and illustrate how the risks have evolved along with the COVID-19 pandemic.

The FATF update reinforces the continuing importance of a risk-based response which does not disrupt essential and legitimate services. HKMA has already articulated its regulatory expectations in this respect in previous circulars (please find the links to those circulars in Remarks column). 
This circular also provides updates on efforts of HKMA and other organisations on combating ML/TF risks:

  • HKMA has been monitoring COVID-19 related impact on ML/TF risks and working closely with AIs and SVF Licensees to cope with the developments;
  • the Fraud and Money Laundering Intelligence Taskforce, the public-private partnership for information sharing in Hong Kong which consists of law enforcement agency, banking supervisor and ten retail banks in Hong Kong, has been delivering alerts and case-based intelligence on COVID-19 related deceptions;
  • the Fraud Risk Management Taskforce established under the Hong Kong Association of Banks (HKAB) broadcasted a video clip on television to remind the public to stay alert of COVID-19 related fraudulent activities and shared good practices on fraud prevention and detection with the industry; and
  • HKAB also held a sharing session, with HKMA’s support, to share financial crime trends observed and challenges encountered during COVID-19, and good practices of AIs in managing and mitigating ML/TF risks.

HKMA reminds AIs and SVF Licensees to study the FATF update in conjunction with the ML/TF risk information provided through the above forums, and consider the relevant implications for their ML/TF risk management.

31 December 2020  Click here 

Please see FATF’s update dated December 2020 here.

Please see the HKMA’s circulars dated 30 July 2020:

Update 1

Update 2

The above circulars have been covered in items 33 and 34 below respectively.

Please see the HKMA’s circulars dated 7 April 2020:

Link 1

Link 2

The above circulars have been covered in items 46 and 47 below respectively.

28 Extension of Principal Moratorium for 80% and 90% Guarantee Products  HKMC Insurance Limited (a wholly-owned subsidiary of the Hong Kong Mortgage Corporation Limited) announced that the application period for principal moratorium for the 80% Guarantee Product and the 90% Guarantee Product under the SME Financing Guarantee Scheme (SFGS) is extended for 6 months to 31 March 2021. The maximum duration of principal moratorium is increased from 12 months to 18 months and the loan guarantee period can also be extended correspondingly.  2 September 2020  Click here

Please see the press release published on HKMA’s website dated 29 May 2020 here.

The above press release has been covered in item 36 below. 

29 Pre-approved Principal Payment Holiday Scheme extended by a further 6 months 

The HKMA published a circular announcing the extension of the Pre-approved Principal Holiday Scheme by 6 months. 

As covered in a previous circular (please see “Remarks”), the HKMA and the Banking Sector SME Lending Coordination Mechanism had put in place the Pre-approved Principal Payment Holiday Scheme for its authorised institution participants (AI) to alleviate cash flow difficulties faced by small and medium size corporations. Under the Scheme, eligible small and medium size corporate customers could make deferred repayments on loan principal payments. 

The Scheme has now been extended for a further 6 months so that all loan principal payments falling due between November 2020 and April 2021 will be deferred by six months (except for repayments of trade loans, which will be deferred by 90 days). Participating AIs will handle each eligible customer’s case on a “pre-approved” basis, and may request customers (especially those who have been granted multiple extensions of payment holidays) to provide up-to-date business and financial information to better understand their needs when processing their cases. 

2 September 2020 Click here 

Please see the HKMA’s circular dated 5 August 2020 here

The above circular has been covered in item 32 below.

30 Prudential Measures for Mortgage Loans on Non-residential Properties 

The HKMA published a circular on adjustments introduced by the HKMA on 19 August 2020 to the prudential measures for mortgage loans on non-residential properties.The HKMA noted that as a result of the COVID-19 outbreak, non-residential property markets have seen major corrections, with the prices of offices, flatted factories and retail premises declining by 15%, 11%, and 10% respectively. The transaction volume of non-residential properties also contracted in the first half of 2020, and will likely remain under pressure due to lowered business confidence and rising geopolitical tensions.

In light of this, the HKMA has decided to adjust the countercyclical macroprudential measures for mortgage loans on non-residential properties. The applicable loan-to-value ratio caps under different scenarios for non-residential properties have been adjusted upward by 10%. These changes will take effect from 20 August 2020 and will apply to all transactions where the provisional sale and purchase agreement is signed on or after that date.

The HKMA reiterated that these measures are intended to apply to mortgage loans for the purpose of financing property transactions or the refinancing of existing properties. They are not intended to apply to credit facilities secured by properties for the purpose of financing the business operation of corporates, as these credit facilities are subject to a set of comprehensive credit underwriting standards and regular credit reviews by authorized institutions. AIs may send any questions they have regarding this circular to [email protected]

19 August 2020  Click here    31 Reminder of Investor Protection Measures 

The HKMA published a circular reminding Authorized Institutions (AI) of some important investor protection measures in light of the current volatility in the markets.

In view of the recent price volatility of various markets and investment products (including shares, bonds, commodities, precious metals, FX, etc.) as well as the operational challenges brought about by COVID-19, AIs are reminded to remain vigilant, and continue to treat customers fairly and act in the best interest of their customers in the sale of investment products, in line with the Code of Banking Practice and the Treat Customers Fairly Charter. AIs should exercise extra care when handling leveraged transactions where the customer could have potential losses exceeding the invested amount.

Registered institutions are also reminded to observe the following requirements when making solicitations or recommendations on investment products regulated by the Securities and Futures Ordinance:

  1. ensure proper product due diligence, taking into account, among others, the market conditions amid the COVID-19 situation, which may impact on the risk return profile and prospect of an investment. Where the continuous review by an RI of the risk rating of an investment product results in a higher risk rating being attributed to the product, the RI should follow the existing requirement of disclosing such increase in risk rating to customers to whom it has recommended and sold the product;
  2. give due consideration to relevant circumstances of a customer when assessing the suitability of an investment product for the customer. Where an RI is aware of material changes to a customer’s circumstances (e.g. impact arising from the COVID-19 situation), such changes should be taken into account in the assessment; 
  3. explain to the customer the risks and features of the investment product; and 
  4. present balanced views: do not focus solely on advantageous terms such as high coupon rates or yields, but should explain also the disadvantages and potential downside risks.

With regards to leveraged transactions, AIs should

  • make adequate disclosure of the nature, key features and terms, and the associated risks of leveraged products or transactions, especially the risk of losing more than the customer’s invested amount (and where applicable the risk of having unlimited loses, e.g. a customer writing a naked call option) 
  • ensure that the customer is willing and has sufficient net worth to assume the risks and bear the potential losses of the leveraged transactions.

In practice, AIs are expected to put in place policies and controls to ensure that targeted customers have been provided with adequate disclosure of, and are capable of understanding the risk of leveraged or margin trading, and the possibility of being subject to margin-calls within a short time period. AIs are also expected to put in place mechanism to monitor customers’ margin maintained with the AIs. The HKMA will continue to monitor AIs’ compliance with the regulatory requirements as part of its on-going supervision.

7 August 2020 Click here   32 90 day extension of Trade Loans under the Pre-approved Principal Payment Holiday Scheme 

The HKMA published a circular announcing that in light of the issues caused by the COVID-19 outbreak, all Authorized Institutions (AI) are requested to extend the principal payment for trade loans under the Pre-approved Principal Payment Holiday Scheme (Scheme) for another 90 days.

According to the HKMA, the deferment should cover trade loans both currently subject to the Scheme as well as those drawn between 1 May 2020 to 31 July 2020 by eligible customers with no outstanding payments overdue for more than 30 days as at 1 August 2020. For facilities which are self-liquidating in nature, AIs may require the loan to be settled when the underlying payment has been received by the customer. All other terms of the Scheme stated in the Annex to the HKMA’s circular on 17 April 2020 will continue to apply.

As only between 10% to 20% of eligible corporate customers have chosen to take up the Scheme and with AIs adopting work-from-home arrangements in response to the pandemic, AIs will not issue individual notifications to customers regarding the deferment arrangement. Interested corporate customers are requested to contact their AIs, which will handle principal deferment requests on a “pre-approved” basis. AIs may request customers to provide up-to-date operational information to better understand their needs when processing their requests.

The HKMA reiterated that this extension of the Scheme will not by itself render a trade loan to be downgraded, nor will it cause the loan to be categorised as “rescheduled” as long as the terms of the extension are “commercial”. This principle applies regardless of whether or not the trade loan is already on a payment holiday. That said, borrowers who are unable to meet the restructured payment schedule should continue to be recognized in a timely manner and the classification of their loans should refer to the HKMA’s Guideline on Loan Classification System as well as previously issued FAQs. 

The HKMA will continue to engage banks and the commercial sectors through the Mechanism and expects to arrive at a decision regarding follow-up arrangements for the Scheme, which will end in October, as soon as possible.

5 August 2020  Click here 

Please see the Annex to the HKMA’s circular on 17 April 2020 here.

(also covered below in item 43)

 

  33 Coronavirus disease (COVID-19) and Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) measures – An Update

The HKMA published a circular highlighting some key observations and industry practices to assist Authorized Institutions (AI) in developing sustained efforts to cope with the evolving COVID-19 situation and support operational responses which are consistent with the risk-based approach (RBA). 

The HKMA stated that as the situation continues to evolve, it has become clear that measures originally intended to be short-term may now have to be kept in place by AIs for relatively longer, or in some cases reintroduced as new clusters of COVID-19 cases emerge. Key observations and practices highlighted by the HKMA include:

1. Customer due diligence under social distancing and travel restrictions

The HKMA noted that social distancing and a significant reduction in travel have significantly impacted the ability of AIs to interact with existing and potential customers. AIs are increasingly using video conferencing to interact with customers in the course of on-boarding and ongoing customer due diligence reviews. Some AIs have utilised the flexibility provided in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance to delay verifying the customer’s identity, while adopting appropriate risk mitigating measures. In addition to remote on-boarding for individual retail customers currently offered by more than 10 AIs, some AIs have also expedited testing of similar initiatives for corporate customers.

2. Pressure on AML/CFT resources

The HKMA noted that all AIs have some form of business continuity planning in place to maintain sound operations. To address the pressure on resources, AIs have been adopting a number of responses, which collectively have minimised potential impact to AML/CFT processes. These include reprioritising work on the basis of ML/TF risks, reallocation of staff, staggering office hours and equipping staff with work-from-home capabilities. Some AIs are also expediting their exploration of regulatory technology (RegTech) solutions (e.g. machine learning) to reduce the number of false positives generated from transaction monitoring and screening systems, and thus enhancing efficiency and effectiveness.
The HKMA continues to monitor resource allocation as part of AIs’ operational responses to ML/TF risk management and reiterates through this engagement the importance of applying the principles of the RBA, maintaining adequate records of decisions made and that relevant controls or risk appetite need not be compromised in the process.

3. Emerging threats and changes in customers’ behaviour

The HKMA noted that AIs have increased their understanding of and vigilance to emerging COVID-19 related financial crime risks, including through the Fraud and Money Laundering Intelligence Taskforce (FMLIT) and a recently established Fraud Risk Management Taskforce under the Hong Kong Association of Banks. In line with global trends, some AIs have also identified changes in customer behaviour, such as digital payments and online transactions, and have been working to incorporate their understanding of emerging risks into transaction monitoring rules and scenarios. The HKMA further noted that it had observed examples where RegTech is helping to build out a more collaborative, intelligence-led approach to financial crime risk management and that some AIs are applying advanced analytics to help detect networks and common vulnerabilities.

The HKMA will continue to work closely with AIs to support ongoing industry efforts, in line with the principles of RBA. AIs may approach the HKMA through their usual contacts at the AML & Financial Crime Risk Division or at [email protected] for any questions about this circular.

30 July 2020 Click here  Please see the Annex to this circular setting out further details regarding the key observations and practices highlighted by the HKMA here.  34 Coronavirus disease (COVID-19) and Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) measures – An Update

The HKMA published a circular updating Stored Value Facility (SVF) Licensees on some key observations and industry practices which the HKMA shared with the banking sector in a circular dated 30 July 2020 regarding the ongoing AML/CFT response to COVID-19 related challenges.

The HKMA stated that as the situation continues to evolve, it has become clear that measures originally intended to be short-term may now have to be kept in place by SVF Licensees for relatively longer, or in some cases reintroduced as new clusters of COVID-19 cases emerge. The HKMA will continue to work closely with SVF licensees to support ongoing industry efforts, and reiterated that the principles of the RBA provide the flexibility to be both pragmatic and responsive to the evolving COVID-19 situation and the challenges it presents.

30 July 2020

 

Click here 

Please see the HKMA’s circular on key observations and industry practices at here.

(also covered above in item 33)

35 US Dollar Liquidity Facility

The HKMA published a press release announcing the extension of the temporary US Dollar Liquidity Facility to 31 March 2021. The US Dollar Liquidity Facility was originally launched by the HKMA in a circular dated 22 April 2020 in response to a temporary repurchase agreement facility (FIMA Repo Facility) launched by the US Federal Reserve on 31 March 2020, with the intention of providing licensed banks with an additional channel to obtain US dollar liquidity in light of the tightness in the global US dollar interbank money markets amid volatilities and uncertainties in the global financial markets brought about by the spread of COVID-19. Given the decision by the US Federal Reserve to extend the FIMA Repo Facility to 31 March 2021, the HKMA has decided to extend the temporary US Dollar Liquidity Facility accordingly.

The operational parameters of the temporary US Dollar Liquidity Facility will remain unchanged. A total of US$10 billion is currently available to banks under the Facility in the form of repurchase transactions for a term of 7 days through competitive tenders held by the HKMA every week.

30 July 2020 Click here Please see the HKMA circular announcing the launch of the US Dollar Liquidity Facility on 22 April 2020 at here. (also covered below in item 40) 36 Enhancement Measures to 80% and 90% Guarantee Products under SME Financing Guarantee Scheme

The HKMA published a press release on the enhancement measures to the 80% and 90% Guarantee Products under the SME Financing Guarantee Scheme (SFGS). The enhancement measures were included in the second round of the Anti-epidemic Fund announced by the Hong Kong Government in April 2020. Now Hong Kong Mortgage Corporation Insurance Limited (HKMCI) announced that the enhancement measures will take immediate effect from 29 May 2020.

The enhancement measures are intended to allow more enterprises affected by COVID-19 to apply for guaranteed loans to alleviate their cash flow burden in light of the current economic challenges. 

Under the enhancement measures, the maximum loan amount per enterprise for the 80% Guarantee Product is increased from HK$15 million to HK$18 million, while the maximum loan amount per enterprise for the 90% Guarantee Product is increased from HK$6 million to HK$8 million. All borrowing enterprises under the SFGS can benefit from the enhancements. The eligibility coverage of both guarantee products is also extended to listed companies in Hong Kong. In addition, for the requirement of personal guarantee by individual shareholder(s) under the Special 100% Loan Guarantee, the applicable percentage of equity interest is reduced from over 70% to over 50%, which is in line with that for the 80% and 90% Guarantee Products.

The Hong Kong Government will provide interest subsidy for the 80% and 90% guaranteed loans, with the amount of subsidy capped at 3%. Each loan is entitled to an interest subsidy for a maximum period of 12 months. HKMCI has reached a consensus with the Government and the lenders on the implementation details, which are as follows:

  • All outstanding loans as of 30 April 2020 will receive the first batch of interest subsidy for up to 3 months, of which payment will be successively made starting from the end of June 2020 (Please refer to the Annex for details);
  • The payment of subsequent interest subsidy will be made on a monthly basis thereafter;
  • Interest subsidy is applicable to new loan applications successfully submitted before 31 May 2021.

The interest subsidy will be automatically deposited into relevant bank accounts, and no application will be required, to expedite the support to the borrowing enterprises.

29 May 2020 Click here Please see the Annex to this press release setting out a list of lenders which will pay interest subsidy by the end of June 2020 at here. 37 Additional measures to alleviate the impact of COVID-19 

The HKMA published a circular setting out the application of additional guidance issued by the Basel Committee on Banking Supervision (BCBS) on 3 April 2020 regarding alleviation of the impact of COVID-19 on the global banking system in the context of Hong Kong. The circular focused on the following 3 measures:

  1. Clarifications on the treatment of extraordinary support measures related to COVID-19

    Governments and public authorities in many jurisdictions have introduced extraordinary support measures to alleviate the financial and economic impact of COVID-19. These measures include, among others, guarantee programmes for bank loans and payment holidays offered by banks to borrowers. To ensure that AIs reflect the risk-reducing effect of these measures when calculating their regulatory capital requirements, the HKMA has also enclosed an Annex to this circular setting out several technical clarifications.

  2. Expected credit loss provisioning

    The HKMA expects AIs to continue to apply the relevant expected credit loss (ECL) frameworks for accounting purposes, and also expects ECL estimates to reflect the mitigating effect of the significant economic support and payment relief measures put in place by public authorities and the banking sector. The provision of relief measures to borrowers should not automatically result in exposures moving from a 12-month ECL to a lifetime ECL measurement. Additionally, AIs are expected to exercise informed judgement and to use the flexibility inherent in HKFRS/IFRS 9, for example, to give due consideration to long-term economic trends in estimating ECL. 

    However, the BCBS transitional arrangements for the regulatory capital treatment of ECL accounting will not be adopted in Hong Kong. Instead, the HKMA has lowered the regulatory reserve requirement by half to provide AIs with more room on their balance sheets to cater for future financing needs, as per a circular dated 8 April 2020.

  3. Margin requirements for non-centrally cleared OTC derivatives

    Following the announcement made by the BCBS and the International Organization of Securities Commissions (IOSCO) on 3 April 2020, the HKMA will defer the final two implementation phases of margin requirements for non-centrally cleared OTC derivatives by an additional year. With this extension, the final implementation phase will start on 1 September 2022, at which point covered entities with an average aggregate notional amount (AANA) of non-centrally cleared OTC derivatives greater than HKD 60 billion will be subject to the requirements. As an intermediate step, from 1 September 2021, covered entities with an AANA of non-centrally cleared OTC derivatives greater than HKD 375 billion will be subject to the requirements.

The HKMA will continue to monitor the banking and supervisory implications of COVID-19, and coordinate with the BCBS and other relevant standard-setting bodies on responses to the pandemic.

25 May 2020  Click here

Please see the Annex to this circular setting out clarifications on the treatment of extraordinary support measures related to COVID-19 here.

Please also see the HKMA’s previous circular dated 8 April 2020 for further details regarding the lowered regulatory reserve requirement here.

(also covered below in item 45)

Please also see the SFC’s circular dated 7 May 2020 regarding the SFC’s measures with respect to margin requirements for non-centrally cleared OTC derivatives here.

(also covered in item 17 of the SFC circulars/guidelines above)

Please see the additional guidance issued by the BCBS here.

38 Hong Kong Monetary Authority launches a dedicated email account and enquiry hotline on the Pre-approved Principal Payment Holiday Scheme for Corporate Customers  The HKMA published a press release announcing the launch of a dedicated email account and enquiry hotline to receive comments and answer queries regarding the Pre-approved Principal Payment Holiday Scheme for Corporate Customers (Scheme), which was launched on 17 April 2020. The email account and hotline will help the HKMA monitor the operation of the Scheme. Further details can be found on the HKMA’s dedicated COVID-19 webpage titled “Together, We Fight the Virus!”.  24 April 2020  Click here

Please also see the HKMA’s previous circular dated 17 April 2020 for further details regarding the Scheme here.

(also covered below in item 43)

39 Postponement of 2020 Supervisor-Driven Stress Test The HKMA published a circular informing all locally incorporated licensed banks that the HKMA decided to postpone the 2020 Supervisor-Driven Stress Test to 2021. The HKMA’s decision was intended to provide additional operational capacity for banks to respond to the challenges brought by the COVID-19 outbreak and to continue to support their customers. In making the decision, the HKMA took into account the current capital levels of banks and the satisfactory results of earlier stress tests.  22 April 2020 Click here   40 US Dollar Liquidity Facility 

The HKMA published a circular providing information on the temporary US Dollar Liquidity Facility (Facility), which was announced on the same day. The Facility was launched to provide licensed banks with more US dollar liquidity to meet their US dollar funding needs. This is part of the concerted efforts by central banks to help alleviate tightness in the global US dollar interbank money markets in light of the considerable volatilities and uncertainties in the global financial markets caused by the spread of COVID-19. In principle, the Facility is underpinned by the Federal Reserve’s FIMA Repo Facility. 

The US dollar liquidity will be provided to licensed banks through competitive tender in the form of repurchase transactions for a term of 7 days, settled on the day following the tender. 

From 6 May 2020, the HKMA will conduct a competitive tender every week (normally on Wednesday) for licensed banks to submit bids for US dollar liquidity. Currently a total of US$10 billion is available under the Facility. A licensed bank may submit one valid bid in each tender, and the bid must be at least US$100 million or an integral multiple of US$100 million. The HKMA will contact successful banks to confirm and arrange transfer of eligible assets as collateral to the HKMA, and tender notices and tender results will be published on a designated page on the HKMA website. The names of the banks participating in the tenders or those allotted with funds, and individual allotment amounts will not be disclosed.

The HKMA intends to maintain the Facility until 30 September 2020, and will make a separate announcement if the end date changes. The HKMA may revise any of the parameters of the Facility at any time as necessary, taking into account market conditions, use of the Facility and other relevant factors. Banks may contact the Monetary Operations Division of the HKMA at 2878 8104 or at [email protected] if they have any questions about the operation of the Facility. 

22 April 2020  Click here 

Please see the press release announcing the Facility’s release here

Please see the annexes to the circular for more details regarding the facility:

Annex A – Key Parameters of the Facility 

Annex B – Summary of Terms

Annex C – Submission of Tender Application

41 Circular to issuers of SFC-authorized paper gold schemes 

The HKMA published a circular referring to the SFC’s circular to issuers of SFC authorized paper gold schemes (PGS). The HKMA reminded authorized institutions (AI) providing PGS services to comply with the SFC’s circular, the Code of Banking Practice, and the Treat Customers Fairly Charter. In particular, the HKMA reminded AIs to 

  1. treat customers honestly and fairly; 
  2. take into account customers’ interest and be responsible for upholding financial consumer protection; 
  3. provide appropriate information at all stages of the relationship with the customers (including any untoward circumstances relating to PGS services and corresponding impact on customers); and 
  4. rectify any operational incident having significant impact on continued provision of PGS services.

The HKMA further reminded AIs which issue PGS to immediately report to the HKMA and SFC any untoward circumstances relating to PGS services that may have material customer impact, including any decision to suspend subscription and/or redemption, and uplift suspension/resume dealing.

20 April 2020  Click here 

Please see the SFC’s circular here.

(also covered in item 20 of the SFC circulars/guidelines above) 

42 Enhancements to Special 100% Loan Guarantee  The HKMA published a press release announcing that the Finance Committee of the Legislative Council had approved the increase of the total guarantee commitment of the Special 100% Loan Guarantee under the SME Financing Guarantee to HK$50 billion. Other changes include increasing the maximum loan amount per enterprise to HK$4 million, the extension of the principal moratorium arrangement to cover the first 12 months, and the extension of the application period to 1 year.  18 April 2020  Click here 

Please also see the HKMA’s previous press release dated 16 April 2020 for further details of the Special 100% Loan Guarantee here

(also covered below in item 44) 

43 Pre-approved Principal Payment Holiday Scheme for Corporate Customers 

The HKMA published a circular announcing the launch of the Pre-approved Principal Payment Holiday Scheme (Scheme) on 1 May 2020. The Scheme is intended to provide immediate relief to eligible small-to-mid-sized corporates facing financial issues in the wake of the COVID-19 outbreak.The HKMA expects all authorized institutions (AIs) to participate in the Scheme, and has confirmed that all of the 11 major lenders in the Banking Sector SME Lending Coordination Mechanism will participate. 

Under the Scheme, participating AIs will pre-approve deferment of loan principal payments falling due between 1 May 2020 and 31 October 2020 of eligible small-to-mid-sized corporates for up to 6 months. All corporate borrowers that have an annual sales turnover of HK$800mn 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. Applications by borrowers are not required so that financial relief can be provided to corporates in the timeliest manner. In accordance with the HKMA’s loan classification guidelines, deferments of principal payments under the Scheme will not by themselves render a loan account to be downgraded to a lower category. 

For corporate customers not currently covered by the Scheme or have payment falling due before 1 May 2020, the HKMA expects AIs to adopt a sympathetic stance and proactively reach out to those customers to understand whether they require similar assistance and assess, on a case-by-case basis, whether it is in line with established risk management principles to provide such arrangements.

The HKMA will issue FAQs about the operation of the Scheme. AIs may approach the HKMA through their usual contacts at the Banking Supervision Department for any question about this circular.

17 April 2020  Click here  Please also see the Annex containing the terms of the Scheme here. 44 Special 100% Loan Guarantee to Receive Applications 

The HKMA published a press release reporting that Hong Kong Mortgage Corporation Insurance Limited (HKMCI) had announced the launch of its Special 100% Loan Guarantee under the SME Financing Guarantee Scheme (SFGS) and would begin receiving applications from 20 April 2020. The guarantee arrangement is intended to help ease the cash flow issues of enterprises affected by the COVID-19 outbreak. 

HKMCI welcomes all lenders under the SFGS to participate in the guarantee arrangement. The following lenders will receive applications from 20 April 2020: Bank of China (Hong Kong) Limited, Bank of Communications (Hong Kong) Limited, Chong Hing Bank Limited, DBS Bank (Hong Kong) Limited, Hang Seng Bank Limited, Nanyang Commercial Bank, Ltd., OCBC Wing Hang Bank Limited, Standard Chartered Bank (Hong Kong) Limited, The Bank of East Asia, Limited and The Hongkong and Shanghai Banking Corporation Limited. Other lenders have also indicated their interest in joining. 

16 April 2020  Click here    45 Regulatory reserve

 

The HKMA published a circular informing locally incorporated authorized institutions (AI) of its decision to lower the regulatory reserve (RR) requirement on locally incorporated AIs by 50% with immediate effect. The HKMA noted that the decision was taken partly in light of the need to provide AIs with more lending headroom to support customers in coping with the COVID-19 outbreak, and encouraged AIs to do so. The HKMA expects that AIs should not use the RR release for dividend distribution, share buyback or payment of bonus to senior management. The HKMA will continue to assess the situation to determine if any further adjustments are necessary. AIs may approach the HKMA through their usual contacts at the Banking Supervision Department for any question about this circular.

The RR requirement was implemented under the Hong Kong Financial Reporting Standard 9 (HKFRS 9) since January 2018. The HKMA observes that locally incorporated AIs have made good progress in enhancing their expected loss provisioning models, systems and controls, and in general reported notable increases in their accounting provisions for the second half of 2019 given the deterioration in the economic environment. This indicates that the “expected loss” provisioning requirement under HKFRS 9 is robust and responsive to changes in external conditions. Accordingly, the need for locally incorporated AIs to maintain an RR on top of accounting provisions has diminished. This also plays a part in the HKMA’s decision to lower the RR requirement.

8 April 2020 Click here Please also see the mechanism for calculating the reduction in RR and adjustment to target rate of benchmark regulatory provision at here. 46 Coronavirus disease (COVID-19) and Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) measures (For AIs) The HKMA published a circular setting out measures which should be taken by Authorized Institutions (AI) against money laundering and terrorist financing in light of the COVID-19 outbreak, and the HKMA’s support in implementing such measures. The measures focused on three main elements, namely remote on-boarding and simplified due diligence, continued vigilance to COVID-19 related financial crime risks, and ongoing outreach and advice. The HKMA will continue to work constructively with AIs to keep its assessment of the situation up-to-date and address practical AML/CFT issues that may be related to COVID-19 in the most pragmatic manner, including through the provision of further guidance to support the current industry efforts in the light of evolving situation. AIs may approach the HKMA through their usual contacts in the AML & Financial Crime Risk Division or [email protected] for any question about this circular.  7 April 2020 Click here   47 Coronavirus disease (COVID-19) and Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) measures (For SVF Licensees) The HKMA published a circular setting out measures which should be taken by Stored Value Facility (SVF) Licensees against money laundering and terrorist financing in light of the COVID-19 outbreak, and the HKMA’s support in implementing such measures. The measures focused on three main elements, namely customer due diligence, continued vigilance to COVID-19 related financial crime risks, and ongoing outreach and advice. The HKMA will continue to work constructively with SVF licensees to keep its assessment of the situation up-to-date and address practical AML/CFT issues that may be related to COVID-19 in the most pragmatic manner, including through the provision of further guidance to support the current industry efforts in the light of evolving situation. SVF licensees may approach the HKMA through their usual contacts in the AML & Financial Crime Risk Division or [email protected] for any question about this circular.  7 April 2020 Click here  

48

The HKMA and the banking sector join forces to help Hong Kong’s economy overcome the outbreak of COVID-19

The HKMA published a press release summarizing the results of a meeting with Hong Kong Mortgage Corporation Insurance Limited (HKMCI), major banks, and representatives from the commercial sector regarding measures by banks and the HKMA to support SMEs in the wake of the COVID-19 outbreak. The HKMA noted that a number of previous measures had seen success and provided statistics in this regard. The HKMA and HKMCI also suggested 5 more measures to further support SMEs in addressing cash-flow pressure.

3 April 2020

Click here

Please also see Legal Update here.

49

Liquidity measures in response to Covid-19 outbreak

The HKMA published a circular outlining liquidity measures taken to ensure the continued operation of the interbank market and banking system. The measures taken focus on three aspects, namely the HKMA’s Liquidity Facilities Framework, the Federal Reserve’s temporary Financial Services Instant Messaging Association (FIMA) Repo Facility, and the HKMA’s supervisory expectations on the use of liquidity buffers under the liquidity coverage ratio (LCR) and liquidity maintenance ratio (LMR) regimes. The HKMA also reminded authorized institutions (AI) to ensure they have the appropriate internal policies and processes in place when using the HKMA’s liquidity facilities and buffers, and the HKMA will reach out to AIs to ensure compliance.

3 April 2020

Click here

Please also see the Annex to the circular containing clarifications on the HKMA’s Standby Liquidity Facilities (SLF) framework here.

50

Deferral of Basel III implementation and HKMA’s supervisory actions in response to COVID-19

The HKMA published a circular in response to the decision by the Group of Central Bank Governors and Heads of Supervision (GHOS) to defer the implementation of Basel III by one year, to allow banks time to deal with current issues arising from the COVID-19 outbreak. The HKMA stated that it would accordingly delay its own implementation of Basel III to 1 January 2023, in line with GHOS.

30 March 2020

Click here

 

51

Requirements under section 60 of the Banking Ordinance (Cap. 155) and disclosure requirements under the Banking (Disclosure) Rules (Cap. 155M)

The HKMA published a circular regarding the requirement for authorized institutions (AIs) incorporated in or outside Hong Kong to file audited annual accounts and other documents with the HKMA under section 60 of the Banking Ordinance. The HKMA will allow AIs to apply in writing for an extension of the deadline to do so, if necessary due to operational difficulties caused by the COVID-19 outbreak.

7 February 2020

Click here

 

52

Measures to relieve impact of the novel coronavirus

The HKMA published a circular outlining measures that authorized institutions (AI) should implement to relieve the impact of COVID-19 on their customers. The measures include temporary relief measures to lessen the impact of financial stress, such as principal moratorium for residential and commercial mortgages and fee reduction for credit card borrowing. The HKMA also suggested AIs should adopt a sympathetic stance in dealing with customers facing financial stress, and communicate their policies to relevant staff to ensure consistent treatment of customers.

6 February 2020

Click here