bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

sponsorType

authorLocations

authors

paywallTypes

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

SCMP Reporter

LEGISLATING limits on banks' mortgage lending sounds like something that ought to come out of one of the West European nanny states where governments see it as their given right to interfere in everything from foreign exchange to what constitutes true chocolate.

  But no, it seems that this proposal came from the hallowed corridors and good offices of the Hong Kong Monetary Authority.

  What's more, the news leak of the legislative proposal, whether real or otherwise, apparently came with a stamp of approval from the banking community.

  Not only did the banks themselves intimate that legislating limits on their mortgage lending was a good idea, but key members of the Hong Kong Association of Banks also showed their approval.

  But after making a few phone calls and having cast the net for opinion in the banking community, Business Post found this alleged assertion of support to be quite false.

  What is true is that quite a number of bankers appear to be happy with the current 70 per cent limit on lending. They are happy to see this remain in place for some time.

  But the idea that it should be legislated was given the thumbs down, along with loud raspberries.

  There is no need to legislate this area of lending, which is probably best left for the banks to determine by themselves.

  The monetary authority has an adequate supply of sticks to poke into the wheels of any unruly member of the local banking community who might choose to go off on a reckless lending spree.

  A change in solvency requirements would soon slow down this kind of activity from any such bank. It could also down slow a whole industry for that matter.

  However, the powerful Hong Kong Association of Banks ought to serve as a useful conduit for any governmental venom for any injudicious banking-sector activity.

  Fixing the mortgage lending limit at current levels by statute would bring a wholly inappropriate measure of legislative imperative to an area of banking that is best left to a combination of collaborative regulation and market forces to sort out.

  Although many experienced Hong Kong residents might add testament to the view that the territory's image as a centre of laissez-faire economics is a myth, it would be wrong to conclude they are ready for copious amounts of government legislative intervention.

  Through the use of tools now available, the Government and the banking sector have shown themselves able, over the past 18 months, to stop the residential property speculator bogey man in his tracks.

  Changes in the payment of stamp duty on deals, the 70 per cent mortgage lending limit, and a whole raft of restrictions on end-user borrowing have managed to quell the rampant speculation seen in the residential property market in late 1991, when the Government first moved on this kind of activity.

  There are obviously risks attached to banking and bank lending just as there are risks attached to doing any kind of business, whether it be undertaken in Hong Kong or in a more mature Western market. As much as it might like to, the Hong Kong Governmentcannot legislate away risk.

  It is also worth making the point that while demand for residential properties in Hong kong is in a very healthy state at present, and has been for at least two years, this has not always been the case and is unlikely to remain so in the future.

  If the Government is trying to avoid the kind of slump that occurred in 1983 and 1984, after a major boom, then it has shown by its action over the past 18 months that such booms and crashes can be avoided in Hong Kong.

  The addition of legislation to the equation at this stage in the proceedings might place an unnecessarily inflexible obstacle in the way of policy-makers in the future.

  There might come a time when the banks and the policy-makers want to relax the lending restrictions because of a downturn in activity in the residential property market.

  A slowdown in China's economy and a sudden loss of confidence in Hong Kong, for whatever reason, might see the residential property market in need of a pick-me-up in 1996.

  The Government will presumably need to consult on such legislative proposals. It might find that in formal consultation on the proposal, the mooted support for such change will be, in effect, muted.



Law may be an ass in mortgage lending case