Hong Kong Banks Dedicate $47bn in SME Loans Following Plea from John Lee: An Effort to Bolster Evolving Business Climate

Banks in Hong Kong have committed to providing US$47 billion in loans to Small and Medium Enterprises (SMEs) following pleas for assistance heard by John Lee. Deputy CEO of HKMA, Arthur Yuen, has stated that these SMEs will now be capable of securing the much-needed funds to adapt to the city's changing business landscape.

Sixteen prominent banks in Hong Kong have committed to allocate HK$370 billion (US$47 billion) to assist small and medium-sized businesses (SMEs) in navigating economic challenges. The lending sum may increase following the city's unofficial central bank's immediate reduction of a crucial capital requirement on Friday.

On Friday, Arthur Yuen Kwok-hang, the Deputy CEO of the Hong Kong Monetary Authority (HKMA), announced in a press conference that the countercyclical capital buffer ratio has been reduced from 1% to 0.5%. This move will free up between HK$300 billion and HK$400 billion in liquidity, thereby enabling banks to provide more loans to small and medium-sized enterprises.

Yuen stated that as Hong Kong is presently experiencing an economic shift, both the HKMA and the banking industry are cognizant of the necessity for SMEs to pursue adaptation and adjust to alterations in the market and business operation conditions.

"The allocated HK$370 billion will enable small and medium enterprises (SMEs) to secure the crucial funding they need to adapt to the changing business landscape. The HKMA will oversee whether the banks are utilizing the extra freed-up capital to increase their lending to the SMEs."

The countercyclical capital buffer ratio serves as a tool to accumulate extra capital during times of high credit growth. This reserved capital can later be utilized when the credit cycle shifts, to offset losses. This process ensures the banking system can maintain lending activities during the ensuing economic decline.

The HKMA announced it will permit banks to implement favorable capital measures under the Basel III regulations right away, instead of waiting until the start of next year. This enables banks to leverage 15 percent less capital for loans supporting SMEs that have a yearly revenue of no more than HK$500 million.