HKMA extends Pre-approved Principal Payment Holiday Scheme

Participating banks have granted over $750b relief in the scheme since January 2021.

The Hong Kong Monetary Authority (HKMA), together with the Banking Sector SME Lending Coordination Mechanism (Mechanism), announced that the Pre-approved Principal Payment Holiday Scheme will be extended for another six months to October 2021.

“Given the persistence of the COVID-19 pandemic around the globe and the severity of the ensuing impact on the global and local economy, some small and medium-sized enterprises continue to face cash-flow pressure. The Mechanism agreed that 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,” HKMA said.

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.

To strike a balance between catering for the unique circumstances facing individual 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, the HKMA said.

The scheme, which took effect in May 2020, was extended by six months from November 2020 to April 2021. Around 100 banks participate in the scheme, which covers 120,000 eligible corporate customers. From May to October 2020, 19,000 eligible corporate customers participated in the Scheme, representing a participation rate of 16%.

Following the scheme’s extension in November 2020, the number of participating corporate customers dropped to 5,100, representing a participation rate of 4%. All corporate loans including mortgages, vehicle loans, and trade facilities are covered by the Scheme