* HK bank sector's mainland exposure rose 30 percent in 2013
* HKMA says does not set loan quotas for banks
* HKMA brings forward deadline to review stable funding rule
as loans surge
(Adds comparative figure on mainland lending for 2012; changes
to stable funding rule)
HONG KONG, April 15 The Hong Kong Monetary
Authority (HKMA) said on Tuesday that mainland-related lending
in the city's banking sector is supported by genuine economic
activities, countering fears about exposure to rising levels of
bad debt in China.
The comments came after Hong Kong banks ramped up lending to
China in recent years, fueling concerns about their credit
exposure to the mainland at a time when sliding economic growth
and defaults are making investors nervous.
Some market observers consider that even a modest increase
in non-performing loans would have a significant impact on Hong
Kong bank profits, suggesting the sector will be a sensitive
indicator of China's debt markets in the year ahead.
At the end of last year, the Hong Kong banking sector's
total mainland-related customer loans hit HK$2.276 trillion
($293.53 billion), 30 percent more than the HK$1.750 trillion of
Trade finance loans reached HK$313 billion by the end of
2013, according to the data from the city's de-facto central
"Based on our supervisory work, we are satisfied that
mainland-related lending is generally supported by genuine
economic activities," Arthur Yuen, deputy chief executive at the
HKMA, told reporters.
The HKMA does not set any loan quotas for banks, but banks
have to make sure their credit underwriting standards are robust
when they expand loan books, Yuen added.
HKMA also said it will review the amount of money it wants
banks to keep in reserve based on banks' loan positions at the
end of March, rather than June as originally announced.
The change reflects an unexpected surge in lending in
January when total loans in the banking sector rocketed up 44.5
percent compared with the same month last year, HKMA said.
Banks are currently required to back up loans with funds
from sources deemed by HKMA to be stable, should banks grow
their loans faster than the sector average in 2013.
HKMA could lower the current threshold of 20 percent loan
growth against stable funding when it reviews the mechanism in
March, Yuen said, forcing banks to fund their loan books more
Banking sources told Reuters Basis Point in March that the
HKMA has asked them to tighten approval processes on syndicated
loans for Chinese companies raising offshore loans in Hong Kong.
($1 = 7.7540 Hong Kong Dollars)
(Reporting by Michelle Chen and Lawrence White; Editing by
James Pomfret and Stephen Coates)