Hong Kong banks to offer relief on mortgages, credit cards, corporate loans as coronavirus outbreak weighs on economy

Some banks in Hong Kong are rolling out measures to help homeowners and businesses in the city overcome the impact of coronavirus outbreak on their finances as the government and rating companies warn of further fallout in the local economy.

The Bank of China Hong Kong, one of three currency-issuing lenders in the city, was first to move on Thursday when it offered relief to clients facing affected by the viral outbreak. Standard Chartered is evaluating programmes to help struggling customers, while HSBC said it had already put in place plans to help small businesses.

Other lenders are likely to follow suit. The Hong Kong Monetary Authority said some banks would introduce a temporary freeze on principal repayment of residential and commercial mortgages, reduction in credit card fees and restructuring of repayment schedules for corporate loans.

“The HKMA welcomes such initiatives, and would encourage other [authorised institutions] to consider taking similar action,” Raymond Chan, the HKMA’s executive director for banking supervision, said in a letter to industry leaders. “A proactive response by the banking industry will help mitigate the financial consequences of the outbreak.”

Finance chief Paul Chan Mo-po warned on Sunday the city’s economy could shrink again in 2020 as the outbreak forced tourists to stay at home and prompted some businesses to temporarily shut their businesses. The government has said retail sales slumped last quarter by the most on record as mainland tourist arrivals shrank.

Schools are closed until March 2 and employers have been encouraged to allow their staff to work from home to stem the spread. The deadly virus has claimed more than 560 lives and infected more than 28,000 people, mostly in mainland China, where the virus originated. Hong Kong has recorded at least 22 confirmed cases and one death.

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Bank of China Hong Kong said it would allow individuals and corporate clients to only pay interest on their mortgage loans for up to six months, but that could be extended to one year. Clients would need to apply before June 30 and be in good standing on their payments for the past year, it said.

The lender also said it would waive penalties for credit card customers facing difficulty and offer low-interest loans to small and medium-sized businesses. It would facilitate account opening and waive fees for companies that produce face masks and other medical equipment used to combat the virus.

Banks should take a “sympathetic stance” in dealing with customers facing financial stress because of the virus, the HKMA said in the letter. They should, to the extent prudent risk management principles permit, consider requests from these borrowers for temporary relief arrangements favourably, it added.

Banks “should also clearly communicate their policies to relevant staff so as to enable consistent treatment of customers and make sure that the relevant staff are reachable by customers who wish to discuss their financial situation,” it added.

Regulators in mainland China issued guidances to lenders last month to give special consideration to individuals having difficulty repaying their mortgages or credit cards.

Hong Kong’s banks, as well as mainland lenders, made similar moves during the Asian financial crisis in 1998 and Sars (severe acute respiratory syndrome) epidemic in 2003, which both weighed heavily on the city’s economy.

“It helps many mortgage borrowers and companies to better manage their cash flow and to go through the crises,” Andrew Fung, a former veteran banker with 30 years of experience, said. “These measures are effective and helpful.”

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The total outstanding amount of mortgage loans in Hong Kong stood at HK$1.437 trillion (US$185 billion) at the end of last year, according to the HKMA.

Under Bank of China Hong Kong’s relief measures, a typical borrower with a mortgage loan of HK$4 million at an annual interest cost of 2.25 per cent would save HK$32,000 in payments over a six-month period, according to Raymond Chong, managing director at mortgage broker StarPro Agency.

Ivy Wong Mei-fung, a managing director at Centaline Mortgage Broker, said the measures would have a neutral impact on the property market as it would not affect new borrowers or lead to more buying interest.

BOC Life also said it would allow policyholders facing difficulty to delay paying their annual premiums until June of this year.

Standard Chartered said Thursday it was “looking at various programmes to help relieve some of those pressures from our clients and to help them get through this difficult time. More details will be announced in due course.”

HSBC has maintained a “constant dialogue” with individual and business customers to understand how the economic headwinds may be affecting their financial situations, a spokeswoman said. The bank unveiled several measures to help support small- and medium-sized businesses in August and its life insurance business would extend special coronavirus coverage to its customers, she said.

“We value our long-term relationships with clients and have always worked closely with our customers to support their financial needs in different circumstances,” she said. For those affected by the outbreak, “we will work with them to review their current situation and identify appropriate arrangements,” she added.