Hong Kong on Monday took measures to help banks put more money in the hands of local businesses in a move to shore up the territory’s deteriorating economy after months of unrest.
The Hong Kong Monetary Authority (HKMA), which operates as a de facto central bank, said that it would reduce the amount of capital lenders have to maintain.
The move is intended to make it easier for banks to lend to small and medium-sized enterprises (SMEs), which have been hit by months-long protests that have caused a precipitous drop in tourism, retail sales and property values.
The countercyclical capital buffer was lowered to 2 percent from 2.5 percent, effective immediately, the HKMA said in a statement.
The cut would allow banks to release an additional HK$200 billion to HK$300 billion (US$25.5 billion to US$38.2 billion) of credit, HKMA chief executive Eddie Yue (余偉文) said in a separate letter.
“We hope that banks will make good use of the newly released headroom to support SMEs,” Yue said.
Hong Kong’s economic environment has “deteriorated significantly” since June, he added.
Lowering the capital buffer, which is built up in good times when the economy is growing and can be cut when it is not, “will allow banks to be more supportive to the domestic economy and help mitigate the economic cycle,” he said.
Yue also reiterated the stability of Hong Kong’s banking system, adding that the territory was well-positioned to withstand market shocks, calling it “robust and sound, with strong capital positions, ample liquidity and good asset quality.”
Hong Kong Chief Executive Carrie Lam (林鄭月娥) pledged measures to address the territory’s notorious housing shortage, as she prepared to deliver her annual policy address, despite concerns about possible disruption by protesters.
Lam yesterday held up a copy of the text while previewing the speech in remarks to reporters.
She said she would attempt to deliver the address in the Hong Kong Legislative Council chambers, which were recently repaired after being ransacked by anti-government protesters in July.
“I’m sure you agree that the most important livelihood issue that a chief executive should address would be housing and land supply,” Lam said, adding that she would present 200 new initiatives.
The chief executive also condemned escalating protester attacks on police officers as the unrest gripping the territory grinds into a fifth month.
The protests began in early June in response to a since-withdrawn bill that would have allowed extraditions to mainland China.
They have since expanded to include calls for greater democracy.
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