Banking supervision and stability
Mr CHAN Chun-ying noted that the total household debt stood at some 69.1% of Hong Kong’s gross domestic products (“GDP”) in the third quarter of 2017. He sought details of household debts classified as “loans for other private purposes”, and enquired about HKMA’s measures to contain the growth of such debts.
CE/HKMA advised that HKMA had been monitoring the trend of the household debt to GDP ratio. He said that about 60-70% of household debts were mortgage loans, the growth of which remained moderate. Of the remaining household debts, about 20% were credit card loans while the rest were “loans for other private purposes”. Within these “loans for other private purposes”, about 70% were secured loans made by private banking customers using their personal assets as collateral for investment purposes. The growth rate of such loans was commensurate with that of the asset under management of the private banking industry, which was higher than the GDP growth rate. While the relevant risk was considered manageable for banks, individual borrowers needed to understand the risks associated with the use of leverage in investments. DCE(B)/HKMA added that the remaining 30% of the “loans for other private purposes” were personal loans without collateral. HKMA had strengthened its supervisory measures (like introducing caps on the debt servicing ratio and payment term) to mitigate possible risks associated with such loans.
The property market
Mr CHAN Chun-ying enquired whether HKMA would implement further counter-cyclical macroprudential measures in view of the continued surge in property prices in recent months.
CE/HKMA stressed that there was no evidence supporting the claim that local property prices would have increased at a slower pace had the Government and HKMA not implemented the demand-side management measures and counter-cyclical macroprudential measures respectively. He advised that one of the key responsibilities of HKMA was to maintain banking stability in Hong Kong. The launch of eight rounds of the counter-cyclical macroprudential measures over the years had greatly enhanced banks’ resilience to a property market downturn. HKMA would continue to closely monitor market conditions and implement appropriate macroprudential measures according to cyclical changes to ensure banking stability. Under the current market conditions, HKMA did not see any reasons to relax its counter-cyclical macroprudential measures. CE/HKMA emphasized that mortgage was not the only factor affecting property prices. Past experience suggested that the market tended to disregard risk factors or warning signals in a property upcycle. He cautioned that it was not reasonable to expect that the HKD interest rates would stay low forever. When taking out a loan, members of the public should carefully assess their affordability and manage risks prudently.
Manpower of the Securities and Futures Commission
Noting that four posts in the Centralised Services Division would be upgraded in 2018-2019, Mr CHAN Chun-ying enquired about the reasons and why the Division had a relatively higher rate in upgrading of posts when compared with other divisions.
The Chief Executive Officer, SFC (“CEO/SFC”) explained that to take forward the initiative relating to enhancement in information technology services, SFC would require more headcount with the necessary expertise. He pointed out that SFC had adopted a new approach to strengthen its capability in data analytics work with a view to enhancing its ability in monitoring market operations and misconducts. This would be a cross-divisional project.
Pointing out that there had been substantial increase in the prices of office premises at core business districts in recent years, Mr CHAN Chun-ying was concerned that the $3,000 million ring-fenced from SFC’s reserves for acquisition of office premises would be inadequate. He asked if SFC would consider increasing the budget for the purchase of its office accommodation.
C/SFC responded that it was estimated that SFC would require an office premises of about 180 000 square feet, which would cost about $7,000 – $8,000 million based on current market price. Although SFC could borrow the shortfall of $4,000-5,000 million, it would be a huge financial burden for SFC. The current lease of SFC office would expire in 2022 (with the option to terminate the lease earlier in 2020). SFC would conduct a detailed assessment of the accommodation options. He added that SFC was open to all cost effective accommodation options including relocating the office premises to areas outside the core Central district.