Regulators dismissed reports that lenders mulled creating a structure to take on their problem debt. But asset sales by weaker developers will up the strain on smaller banks, and an extended slump could put a third of the city’s $180 bln of commercial real estate loans at risk.
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CONTEXT NEWS
The Hong Kong Monetary Authority has no plans to set up a bad bank to absorb souring debt in the financial system, and it understands that “relevant banks also do not have such a plan”, the de facto central bank said in a statement on July 18.
The rebuttal followed a report earlier the same day by Bloomberg, citing people familiar with the matter, that lenders including Hang Seng Bank recently engaged with advisory firms to discuss setting up a special vehicle to take on their bad debt.
Loans for property development and investment in Hong Kong amounted to HK$1.4 trillion ($180 billion) by the end of March, according to the Hong Kong Monetary Authority. Up to 30% of that could be “at risk of downgrade”, Jefferies analysts projected in a research note published on February 7.
