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Following is a question by the Hon Ng Leung-sing and a written reply by the Acting Secretary for Financial Services and the Treasury, Mr James Lau, in the Legislative Council today (April 30):
Question:
According to the financial statistics published by the Hong Kong Monetary Authority (HKMA), the year-on-year increases in the total loans and advances for use in Hong Kong provided by authorised institutions in January and February this year were 15.6 per cent and 20.9 per cent respectively, while such growth rates for the corresponding periods last year were only 9.2 per cent and 8 per cent respectively. In this connection, will the Government inform this Council if it has studied:
(1) the causes of the relatively higher growth rates in the total loans and advances in the first two months of this year; whether an increase in local economic activities was one of the causes; if so, of the contribution of such economic activities to the growth in the gross domestic product;
(2) the relatively higher growth rates in the total loans and advances in the first two months of this year can mainly be attributed to which industries' increased demand for funds; and
(3) whether the relatively higher growth rates in the total loans and advances will increase the systemic risks of Hong Kong's financial system; if it has studied and the outcome is in the affirmative, of the authorities' corresponding measures?
Reply:
President,
According to the statistics of the HKMA, the banking sector's residential mortgage loans increased slightly (3.8 per cent year-on-year) in the first two months of 2014, whilst other loans for use in Hong Kong and trade finance both recorded a double-digit growth. In February 2014, the growth in loans for use in Hong Kong was to a certain extent affected by short-term IPO-related loans straddling the month-end. Excluding these short-term loans, the year-on-year loan growth rate would fall from 20.9 per cent to 18.7 per cent. Detailed analysis of growth in loans for use in other economic sectors can only be conducted after banks submit the relevant data for the first quarter of 2014.
Generally speaking, bank loans provide capital to support economic activities hence contributing to economic development. The monitoring and supervision of the relevant risk is premised on the prudent credit underwriting standards adopted by banks to avoid excessive lending which may lead to risks of asset price bubbles and a rising credit cost. In light of the rapid loan growth in the banking sector in recent years, one of the supervisory focuses of the HKMA has been on banks' relevant risk management. Specific measures include the following -
(1) Regular and thematic onsite examinations are conducted to ensure that banks have adopted prudent credit underwriting standards. So far, the HKMA has not identified major weaknesses in relation to banks' compliance with such standards;
(2) Banks with a high loan growth are subject to the "stable funding requirement" by the end of 2013, to ensure that their loan growth is supported by adequate long-term funding and would therefore be more sustainable against any possible future deterioration in the liquidity situation; and
(3) Regular supervisory stress-testing is conducted to assess banks' resilience to credit shocks.
The HKMA will continue to monitor the loan growth in the banking sector and, if necessary, adjust the relevant supervisory measures in order to maintain the stability of the banking system.
Ends/Wednesday, April 30, 2014
Issued at HKT 12:30
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