Capital "flooding" Hong Kong banking sector "water" to ease tsunami impact

Since the two quarter of 2008, Hong Kong's economy has continued to slump and GDP has seen negative growth for four consecutive quarters.　　As the operating environment has plummeted, Hong Kong's banking sector is generally cautious about SMEs ' credit to reduce credit risk. To this end, the Hong Kong government launched the SME Credit Guarantee scheme and the Special Credit guarantee scheme in October 2008 to provide credit guarantees to encourage banks to increase their credit support to SMEs.　　But the reality is that the cost of credit soared in the second half of 2008, and banks have reduced the ratio of SME loans to overall credit lines. Recently, in order to further alleviate the financial tsunami shocks faced by SMEs, the HKSAR Government strengthened the two schemes by increasing the maximum loan amount of the Special credit guarantee scheme by one to HK $1 million, the increase in government guarantee from 70% to 80% and the maximum guarantee period from 3 to 5 years;　　The SAR government has also increased the total security of the SME Credit guarantee scheme from HK $12.6 billion to HK $20 billion. It is learnt that the HK $8 billion loan from HSBC (00005.HK) has been granted a loan of HK $5.2 billion, a substantial portion of which is guaranteed by the government SME Credit guarantee scheme and the Hang Seng Bank (00011.HK) More than 2000 loans related to the two credit guarantee schemes have been awarded since last year, with a total loan of about HK $5.1 billion.　　This reflects that the large banks have improved their willingness to lend to SMEs after the SAR government undertook most of the credit risks, as well as the current excess liquidity in the banking system, which has led to a decline in local interbank interest rates and a heavy net profit pressure on large, well-funded banks. In addition, local banks are expected to have a flat or limited increase in loan growth this year, affected by the recession and weak overall loan demand. In order to remain profitable, banks have been actively striving for a number of longer-term quality loans, with the current rate of new mortgage loans being only the most favourable rates (P) minus 2.5% to 3%.　　By contrast, the pricing of SME loans is more attractive and the average interest rate is p to p+2%, so the large banks ' attitude towards SME loans is becoming more open. Despite the gradual rise in non-performing loan rates in Hong Kong's banking sector, however, compared with the second half of 2008, the formation of non-performing loans has eased trend, and the guarantee period for SME loans is generally 3-5 years, we believe that non-performing loans will not emerge in the short term, but in the long run, the credit costs of enterprises still have upward pressure.