Hong Kong banks will this week present proposals to the Government to have bankruptcy laws tightened to protect their profit margins. It is widely expected the proposals will include an appeal to lengthen the rehabilitation period as well as measures to make it more difficult for bankrupts to win a speedy discharge - suggestions that have already provoked heated opposition from consumer groups. Outgoing Hong Kong Association of Banks chairman Peter Wong Tung-shun, in his review of the industry last week, said the proposals were being studied by the association's solicitors and would be handed to the Government 'within a week'. Mr Wong pointed out that bankruptcies presented one of the biggest challenges and banks could respond, in a worst-case scenario, by cutting credit and slowing recovery. However, he conceded that aggressive lending policies by banks had played some part in the eight-fold increase in the number of personal bankruptcies to the present 10,000 cases. Behind the aggressive competition for personal lending - and credit card loans in particular - say analysts, are the big profits to be made. A survey released at the weekend by the Lafferty Group underlined this potential. The Asia-Pacific region had reached only one-tenth of its potential, measured against the level of maturity already achieved by cards-based consumer lending in the United States. The London-based research house noted that Hong Kong was one of the world's most developed and profitable credit cards markets, although some leading issuers have recently suffered from unusual levels of bad debts as a result of 'lax' personal bankruptcy laws. Earlier this year, in a review of interim reports of Hong Kong's listed banks, consultants KPMG pointed out that, at the end of June, card lending accounted for just HK$51 billion, or 3 per cent, of HK$1.84 trillion industry loan portfolios for use in Hong Kong. But cards represented the sole growth market - up 23 per cent year on year versus barely changed corporate and mortgage lending. Trade finance was down 13 per cent. However, banks argue the high interest charges on credit cards were justified because of the convenience cards offer to customers and due to the high risks associated with making unsecured personal loans. In its latest quarterly survey on credit card receivables, data collated by the Hong Kong Monetary Authority showed no sign of a let-up in card growth, despite economic clouds. The number of cards in issue was up 6 per cent to 8.4 million in the September quarter, while outstanding loan balances were up 3.6 per cent on the previous quarter to HK$56.5 billion. In a review of last year's bank results, when the trend in card growth first got under way, Jardine Fleming bank analyst Michael Chan calculated that banks were earning yields of 30 per cent on their card lending, versus just 6.7 per cent on corporate loans and 7.25 per cent on mortgages. Since then, yields both on home loans and corporate loans have retreated sharply in the wake of tumbling interest rates this year. HKMA mortgage loan data show that in September this year, 65.1 per cent of home loans were made at more than 2.25 per cent below prime rate - versus just 5.5 per cent in October last year. But the annual percentage rate charged by banks on credit cards has remained stubbornly high at around 25 per cent to 30 per cent. Delinquency rates among card holders in Hong Kong are low by world standards. But loans written off as unrecoverable had surged from just 1.92 per cent at the end of 1997, to 4.6 per cent and could reach 6 per cent by the end of this year, Goldman Sachs bank analyst Roy Ramos said.