Speech at Panel on Financial Affairs

Briefing on the work of Hong Kong Monetary Authority

Measures to help local enterprises combat the coronavirus disease-2019 pandemic

Mr CHAN Chun-ying and the Chairman expressed concern about a potential surge in the classified loan ratio of the banking sector when PPHSexpired. Referring to pages 21 and 22 of HKMA’s powerpoint, Mr CHAN enquired why the proportion of respondents who found it more difficult to obtain credit had increased from 27.3% in the fourth quarter of 2019 to 40.8% in the third quarter of 2020 even though banks’ lending limits for small and medium enterprises (“SMEs”) remained steady in general during the same period. He further enquired about the number of entities which had benefited from the Enhanced SFGS.

Regarding HKMA’s measures to support SMEs, CE/HKMA and DCE(B)/HKMA said that HKMA would engage the banking sector and SMEs to discuss the way forward of PPHS under the Banking Sector SME Lending Coordination Mechanism with a view to striking a reasonable balance between relevant considerations. DCE(M)/HKMA added that among the some 3 100 applications approved after the launch of the Enhanced SFGS in October 2020, around 2 500 applications had benefited from the more favourable terms under the Scheme. As for the results of the SME survey, DCE(B)/HKMA stressed that the survey focused on the “perception” of SMEs over the credit approval stance of banks. It should be noted that only one-third of the respondents to the survey conducted in the third quarter of 2020 had actually borrowed from banks, and only about 20% of these respondents found it more difficult to obtain credit from banks.

The Linked Exchange Rate System and the Exchange Fund

Mr CHAN Chun-ying enquired whether HKMA had any plan to increase EF’s fee payment to fiscal reserves to help address the possible prolonged fiscal deficit of the Government.

CE/HKMA pointed out that the statutory purposes of EF were stipulated in the Exchange Fund Ordinance (Cap. 66), which were to affect the exchange value of HKD and to maintain monetary and financial stability of Hong Kong. The primary investment objectives of EF were therefore to preserve capital and ensure sufficient liquidity, and subject to the aforementioned objectives, to achieve an investment return that would help preserve EF’s long-term purchasing power.

Companies (Corporate Rescue) Bill

Provisional supervision and moratorium

Mr CHAN Chun-ying enquired about the reasons for not adopting the US model (i.e. to allow the management of a company to retain control of the company during corporate rescue). In his view, the management of the company would be in a better position in working out a VA as it was more familiar with the situations of the company concerned. Given that the court would have the power to extend the period of provisional supervision as it considered fit, Mr CHAN enquired whether there would be any limit on the extension of the period, and the relevant requirements under the similar regimes of other jurisdictions. He also enquired whether CRP would override the winding-up procedures set out in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (“CWUMPO”).

SFST explained that CRP involved many stakeholders. The US model was not adopted as there were concerns from some stakeholders that the management of a company undertaking CRP were not independent parties and might only act in the interests of the company. DS(FS)3 added that it was envisaged that the court’s approval for the extension of the provisional supervision period beyond six months would only be sought for more complex cases. While there would be no provision in the Bill prescribing the limit of the period of extension the court might grant, the extension period had to be reasonable. DS(FS)3 also advised that CRP would complement the winding-up procedures under CWUMPO as the court’s leave was necessary for a company already entered into winding-up to initiate CRP.