Banks concerned by HKMC's new name and role

Banks in Hong Kong are casting a wary eye over the Hong Kong Mortgage Corporation's (HKMC) plans to develop products that go beyond its mortgage-insurance-focused business.

Come January, the government-backed institution will have a new name - Hong Kong Mortgage Credit & Guarantee Corporation - that is also helping to feed concerns within the financial services industry that a well-connected new competitor is waiting in the wings.

The HKMC is keen to provide an expanded range of credit and guarantee services to the public after the renaming. One of the firm's core aims is to "enhance the stability of the banking sector by offering a reliable source of liquidity" under a goal "to promote wider home ownership in Hong Kong".

Bankers are now concerned about where any changes in this complementary role to the industry may be heading.

"Business growth at the firm was sluggish and it had to think about including more products and services," said a senior executive of a bank, who declined to be named. "One day, if the HKMC will provide services and products to individuals, without banks acting as the intermediary, then it will compete with us."

The HKMC carries out its role of providing liquidity to banks by buying loan assets during times when the supply of capital is tightening. But, with the banking system flush with funds, asset purchases by the HKMC from banks have been declining.

Set up in March 1997, the HKMC is wholly owned by the government through the Exchange Fund. The firm bought HK$82 million in loan assets in the first half of this year, compared with HK$495 million last year. Assets sales from banks have been shrinking since 2011 as the US Federal Reserve's quantitative easing boosted the funding pool for lenders.