Rafael Hui borrowed HK$75m - but how?
That's what legislators want to know after revelations of the scale of bank loans to the now-bankruptformer chief secretary
Legislators have questioned how Hong Kong banks came to lend a sum believed to exceed HK$75 million to former chief secretary Rafael Hui Si-yan - an amount equal to almost 200 times his monthly salary while he was still in office, and more than 900 times the monthly pension he received when he retired in 2007.
The massive debt accumulated by Hui saw him default on his loan repayments and declared bankrupt last month.
"It is a question of whether the banks were too generous in granting such a huge amount of unsecured loans and, if so, why?" Democratic Party legislator Sin Chung-kai said.
"We want the Hong Kong Monetary Authority to check if the banks were prudent and did a proper credit assessment before granting the loans to Mr Hui."
Christopher Cheung Wah-fung, legislator for the financial services sector, also questioned the loans and pointed out that even broking houses would not advance such huge unsecured loans to their customers.
"Brokers would only grant such huge loans if they held the stock bought by the customer as collateral. The HKMA needs to check whether banks have been too lax in lending money to senior civil servants," Cheung said.
During the past few months, several banks filed writs of demand against Hui. These revealed that he owed Chong Hing Bank HK$9.8 million, Honour Finance HK$3.16 million, Standard Chartered Bank HK$1.19 million, and Hang Seng Bank HK$780,000.
In April, Bank of East Asia filed a writ demanding that Hui repay money due under two overdraft facilities and on two credit cards. When BEA failed to recover the money it filed a bankruptcy petition against Hui in September and the order was granted by the High Court on November 27.
BEA did not disclose the amount it was claiming from Hui, but media reports suggest it amounted to HK$60 million.
Responding to queries from the South China Morning Post, a spokeswoman said the Monetary Authority would not intervene in banks' individual lending decisions. "The HKMA has a guideline on prudent lending procedures for banks. This includes checking the asset quality and other collateral of the borrowers," the spokeswoman said.
A spokeswoman for BEA refused to confirm the amount owed by Hui. "Due to customer privacy, we will not comment on any individual customer's case," the spokeswoman said. "We want to emphasise that the bank always follows its credit approval policy and guidelines when granting credit facilities."
She said the bad debt would not have a significant impact on BEA results this year.
A senior government official told the Post he had not experienced any problems raising bank loans or a mortgage. "Generally, the banking sector is more relaxed in lending to civil servants and we can get a reasonable personal loan and can get loans at a relatively lower interest rate. This is because we have a stable income and a reliable pension," he said.
A banker, who did not work for one of the banks involved in Hui's case, said it was reasonable for banks to be generous when lending to senior government officials and their loans were advanced after a reasonable credit assessment. "When compared with many other jobs, civil servants have an 'iron rice bowl'. They are unlikely to be laid off and get a salary increase almost every year. When they retire, they enjoy a stable pension income every month until their death. The odds of loans given to civil servants going bad are very low."
The banker said non-government officials with stable incomes and good credit records and lots of assets could also get loans easily. "The key issue is whether the bank considers that a borrower is able to repay the loan," he said.
Alan Tang Chung-wah, a partner and head of specialist advisory services in the Hong Kong office of mainland accounting firm ShineWing, who is an expert in bankruptcies, said the banks could now apply to have Hui's assets, including properties or investments, liquidated.
For the next four years Hui would also be subject to the restrictions placed on a person that is declared bankrupt, which means he may not serve as a director of a company.
Hui would also be required to live a basic and simple lifestyle - which means he may not live in deluxe housing or take taxis or go to five-star hotels for meals. He may not travel without a good reason and may not be given a credit card or other bank loans.
Tang said a portion of Hui's income would be handed over to the Official Receiver's Office towards repayment of his loans from the five lenders.
After the four-year period is up the bankruptcy orders will be dismissed, but then any of the five lenders that are still owed money could apply to the court to renew a bankruptcy order for up to another four years, Tang said. After that period the banks could no longer pursue Hui to repay his debts.
"In a sense, Mr Hui could be free again in eight years' time. He could be a director again and return to his normal lifestyle. He could also apply for bank loans then," Tang said.
According to the Civil Service Bureau guideline for bankrupt civil servants, Hui's HK$80,000 monthly pension payment will be suspended during the period he is under a bankruptcy order. The payment of the pension will be resumed once he is discharged from bankruptcy.
During the bankruptcy he may apply to the bureau for an ex gratia payment to cover his daily expenses or repay his debts.
Under the bankruptcy order, Hui - who is involved in a corruption case with Sun Hung Kai Properties' co-chairmen Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen - will not be allowed to hire an expensive barrister to represent him in the criminal trial due to be heard in May next year. But lawyers said if his family was willing to pay the fees, he could still hire a lawyer of his choice.
The Independent Commission Against Corruption alleges that between 2000 and 2009 Hui took more than HK$34 million in bribes and enjoyed the rent-free use of a flat in Happy Valley in return for favours.