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Banking
Return on Loans and Advances (MA(BS)2A) - Definition of "overdue
loans" in respect of loans repayable on demand
In the 1998 Financial Disclosure Package for locally incorporated authorized
institutions (issued on 22 November 1998), the definition of overdue
loans repayable on demand (e.g. demand loans and overdrafts) has been
revised as specified in the "Guidance notes on overdue and rescheduled
assets" ("Guidance Note") attached to the disclosure
package, which is applicable to the relevant institutions' annual accounts
for financial years ending on or after 31 December 1998. This same definition
has also been adopted for the Financial Disclosure Package for overseas
incorporated authorized institutions (issued on 1 December 1998) in
respect of financial years ending on or after 31 December 1998.
In order to ensure consistency in the information on overdue loans
disclosed in the financial statements of authorized institutions and
those reported to the HKMA in the banking return, all authorized institutions
are requested to adopt the revised definition of overdue loans repayable
on demand as specified in the Guidance Note for the purpose of reporting
in the return of Analysis of Loans and Advances and Provisions (form
MA(BS)2A under Note 3) for the position as at 31 December 1998. This
return together with the completion instructions are currently being
amended to bring them in line with the various new disclosure guidelines
issued recently, and will be dispatched to all authorized institutions
as soon as they are ready.
In the meantime, authorized institutions should use the following criteria
for the reporting of overdue loans repayable on demand in the above
return for the quarter ending 31 December 1998:
| i. |
Loans repayable
on demand, e.g. demand loans and overdrafts, should be treated as
overdue where one or both of the following conditions are met:
- a demand for repayment has been
served on the borrower but repayment has not been made in accordance
with the instruction; or
- the loan has remained continuously outside the approved limit
that was advised to the borrower.
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| ii. |
The period
of overdue for a loan repayable on demand should be counted from
the date following either the repayment date specified in the demand
for repayment served on the borrower or the date on which the loan
first exceeded, and thereafter remained continuously outside, the
approved limit notified to the borrower, whichever is earlier.
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| iii. |
The overdue
loans should be reported in the relevant maturity brackets under
Note (3) of the return referring to "Overdue and rescheduled
assets" as and when they have become overdue. However, where
a loan repayable on demand is classified as overdue for the sole
reason that it has exceeded the approved limit, it should not be
reported unless it had remained continuously outside the approved
limit notified to the borrower for more than three months. When
such a loan qualifies for reporting as overdue, the overdue period
should be determined by reference to the whole of the period that
the limit was exceeded.
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| iv. |
Institutions
are requested to provide a footnote to the relevant maturity brackets
under Note (3) of the return showing the amounts, if any, by which
overdue assets have been increased as at end-December 1998 as a
result of the revised reporting criteria. |
Should you have any questions on the above, please contact Miss Jennifer
Lee at 2878 1287 or Mr P M Koo at 28781536.
Updated on 17 Dec 1998
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