Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong has sought to ease concerns about local banks' exposure to debt-ridden mainland firms, saying he is comfortable with the level of lending.
Mr Yam said while recently uncovered problems with mainland enterprises, such as Guangdong International Trust and Investment Corp (Gitic) and Guangdong Enterprises (GDE), had added to the pressures on Hong Kong financial institutions, the estimated exposure level of 5.1 per cent did not present a serious problem.
In the past year, banks have made heavy provisions on their balance sheets for potential losses on loans to government-backed companies, which have exacerbated financial problems stemming from the regional financial crisis of the past two years.
However, during a speech at the Far Eastern Economic Review annual conference yesterday, Mr Yam warned all banks needed to manage credit risk more effectively.
'Despite the generally high standards of banks in Hong Kong, the crisis revealed this to be an area where lessons can be learned,' he said.
In the past placed, Hong Kong banks had too much reliance in asset-based lending, he said.
