Banks might be able to write back some of their loan-loss provisions against their exposure to Guangdong Enterprises (Holdings) (GDE), according to the Hong Kong Association of Banks. HKAB chairman Liu Jinbao said the in-principle agreement on GDE's restructuring reached on Thursday was much better than creditor banks originally expected. The Guangdong provincial government's commitment to conclude the arrangement by the end of this month and generous concessions increased the chance all creditor banks would give it the go-ahead, Mr Liu said. 'We now see that Guangdong's government has put GDE restructuring in a very high priority,' he added. 'We see the operating environment of GDE and other international trust and investment corps much improved from before.' Mr Liu said GDE now had 'a bright future'. Banks might not need to make such heavy provisions, he said. The amount a bank could write back would depend on the extent of provisions already made, the nature of its exposure and the amount of collateral under its control. The Hong Kong Monetary Authority's provisions policy, states the longer the repayment of interest and loan principal had lapsed, the bigger the provisions a bank needed to make. Still, the HKMA has allowed banks more flexibility. 'It would be up to individual banks to decide how to make provisions on GDE loans based on the currently available information,' HKMA chief executive Joseph Yam Chi-kwong said. 'The HKMA will follow the usual approach to discuss with banks . . . their provision policies related to GDE loans on a case-by-case basis,' he said after attending a seminar held by the Hong Kong Institute for Monetary Research. Speaking as the Bank of China Group's Hong Kong and Macau chief executive, Mr Liu said most of its 12 member banks had already made provisions ranging from 25 to 30 cents in a dollar against their GDE exposure. Bank of China, a group member, has the highest exposure to GDE among creditor banks. 'The crucial point here is the management of GDE as a business concern after the agreement,' Mr Liu said. 'If it performs properly and repays the loans as scheduled, we might not even need to provide a penny.' Mr Liu said the write-backs could be included in the banks' accounts for this year as post-balance sheet date entries. The latest restructuring plan was signed by Guangdong executive vice-governor Wang Qishan and the working group of nine creditor banks. It needs to be approved by the rest of the 110 creditor banks. Mr Liu said the restructuring experience would become a landmark case for restructuring of other mainland enterprises. 'The GDE restructuring experience highlights the need to reform our credit culture,' Mr Liu said. 'We should not rely too much on the borrowers' government backing. 'We should concentrate on their cash-flow situations and future prospects.' Mr Yam was even more optimistic. The agreement would help restore the confidence of SAR banks to lend to the mainland enterprises, the HKMA chief said. 'The credit crunch faced by the mainland enterprises and the red chips will be over soon,' Mr Yam said. 'Banks should feel more comfortable to lend to the mainland enterprises after the agreement.'