“General, banks in Hong Kong keep a wholesome stability sheet; their credit score threat is manageable and provisions are enough,” the authority mentioned in an announcement on Thursday. “The HKMA has no intention to arrange the rumoured ‘unhealthy financial institution’. We perceive that the related banks additionally don’t have such a plan.”
The banking regulator noticed no must create a foul financial institution, as the present provisions for unhealthy money owed at banks have been already enough, an HKMA consultant added.
The HKMA’s assertion got here hours after a Bloomberg report, citing unnamed sources, indicated that Dangle Seng Financial institution, Financial institution of Communications, and different lenders have been in discussions about creating a foul financial institution.
A nasty financial institution is usually set as much as purchase non-performing loans and different unhealthy money owed to wash up the stability sheets of one other financial institution.
The Bloomberg report, citing Fitch Rankings estimates, mentioned that soured loans in Hong Kong climbed to US$25 billion on the finish of March, representing 2 per cent of the overall and reaching a two-decade excessive.