January 29, 2014 / 1:01 AM / 4 years ago

Fitch: Hong Kong Banks to Benefit from Household Debt Curbs

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Curtailing Household Debt Benefits Hong Kong Banks here HONG KONG, January 28 (Fitch) Fitch Ratings says in a new report that new stress testing requirements on personal loans in Hong Kong will protect borrowers from excessive debt accumulation and limit banks’ exposure to a potential interest-rate hike. This adds personal loans to the authorities’ focus on mortgages. The changes, however, do not impact the banks’ China-related lending, which Fitch expects to remain the major asset-quality pressure point for which supervision will likely intensify in 2014. Fitch expects banks to adopt tighter underwriting standards for personal loans by linking debt-servicing ratios to loan tenors. The banks’ methods for pricing should improve as banks adopt internal stress-testing for a 300bp increase in loan pricing, as required by the Hong Kong Monetary Authority. Furthermore, separate liquidity stress tests will address banks’ resilience in light of increasingly volatile fund flows. Banks’ risk appetite for personal loans varies. Personal loan exposure ranged from 11.6% of total loans at Shanghai Commercial Bank Ltd (A-/ Stable) to 1.1% at Industrial and Commercial Bank of China (Asia) Ltd (A/Stable) at end-1H13. Fitch has maintained Hong Kong at the highest Macro Prudential Indicator (MPI) of ‘3’ since November 2010, flagging systemic risks from fast loan growth. Hong Kong’s leverage is one of the highest in Asia, with domestic corporate credit/GDP ratio at above 180% and household credit/GDP at 65%. The report, ‘Curtailing Household Debt Benefits Hong Kong Banks - Prudential Measures Examine Unsecured Loans; China Risk Remains Unaddressed’, is available at www.fitchratings.com, or by clicking on the link above. Contacts: Sabine Bauer Senior Director +852 2263 9966 Fitch Ratings (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway, Hong Kong Chikako Horiuchi Director +852 2263 9924 Ivan Lin Associate Director +852 2263 9984 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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