HKMA Frees Up Cash So Banks Can Lend

The Hong Kong Monetary Authority said on Friday it would free up billions of dollars of lending capacity to banks, and ensure sufficient access to US dollars, as businesses suffer during the coronavirus outbreak.

In a statement, it said: "The current level of regulatory reserves will be reduced by half to release a total of HK$200 billion of lending capacity, providing banks with more room on their balance sheets to cater for future financing needs."

The regulatory reserves come from commercial banks' earnings and are deposited with the Monetary Authority, Hong Kong's de facto central bank, as a buffer against losses.

And with most international trade taking place in US dollars, the authority said it would obtain the US currency through so-called repo transactions with the US central bank, the Federal Reserve. These US dollars would then be lent to local banks.

The authority also asked banks to consider automatically extending loan maturities, or principal repayment holidays, to qualified small and medium-sized businesses without requiring them to apply. It said borrowers would just need to indicate whether they would accept the offer.