Hong Kong Monetary Authority orders banks to extend repayment holiday for small firms until October

Name: What Hong Kong’s 2021-22 budget means for residents of the city
Uploaded: 2021-03-04T13:04:51.000Z
Duration: 3 min 43 s
Description: What Hong Kong’s 2021-22 budget means for residents of the city

Banks must allow 120,000 qualified corporate borrowers to defer repayments of principals of corporate loans or mortgages until October this year

HSBC welcomes extension, says it will continue to provide assistance to customers

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The six-month repayment holiday for small and medium-sized enterprises started in May last year and was extended in October. Photo: AFP

Enoch Yiu

Published: 9:04pm, 4 Mar 2021Updated: 9:04pm, 4 Mar 2021

The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, has instructed all banks to extend a loan repayment holiday for small businesses by another six months.

The banks must allow 120,000 qualified corporate borrowers – companies with an annual sales turnover below HK$800 million (US$103 million) and no serious overdue loans – to defer repayments of principals of corporate loans or mortgages until October this year, the authority said on Thursday evening. The companies will only need to pay the interest due on their loans.

“Given the persistence of the Covid-19 pandemic around the globe and the severity of the ensuing impact on the global and local economy, some small and medium-sized enterprises continue to face cash-flow pressures,” the HKMA said.

The second extension of the repayment holiday aims to provide more breathing space for local businesses that have been hit hard by the city’s worst economic recession on record. Hong Kong’s economy shrank 3 per cent in the fourth quarter, resulting in a full-year contraction of 6.1 per cent in 2020, advance estimates released by the Census and Statistics Department show.

The six-month repayment holiday started in May last year and was extended in October. The new extension means some companies will enjoy a break in principal repayments of up to 18 months.

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What Hong Kong’s 2021-22 budget means for residents of the city

“The second extension of the repayment holiday for another six months will help Hong Kong companies survive, as they have been hard hit by the pandemic for more than a year,” said Peter Shiu Ka-fai, a lawmaker representing the wholesale and retail sector. He said businesses will not need support from the banks once Hong Kong’s coronavirus outbreak has been brought under control, and cross-border traffic with mainland China is restored.