Hong Kong Loosens Fintech Lending

The Hong Kong Monetary Authority amended its credit risk management guidelines to encourage greater application of analytic tools when providing loans, in yet another move to further fintech development in the financial hub.

As part of the HKMA’s Banking Made Easy Initiative, lenders are now allowed to further expand personal lending based on credit analytics tools, like big data analysis, to assess and approve applications. The guideline was issued in May 2018 and initially limited such types of lending but will now liberalize the market.

Several AIs (authorized institutions) have since rolled out new retail credit products following the guidelines and the business has been operating smoothly, said HKMA’s executive director of banking supervision, Raymond Chan, in a note.

In view of this latest development, the HKMA considers that it is no longer necessary to set an across-the-board limit applicable to all AIs on such lending (i.e. 10% of an AI’s capital base). Instead, the HKMA expects AIs intending to develop this business to set a limit of their own, which should be commensurate with their risk appetite and risk management capability.

Fintech continues to grow as new regulatory and market developments are picking up momentum in the region.

As a leading financial center, Hong Kong is undoubtedly competing for market share. For example, the «Banking Made Easy Initiative» was issued last year and involved a dedicated task force to help the industry “minimize regulatory frictions” in digital banking including remote onboarding, online finance and wealth management.

Rival hub, Singapore, is also making inroads into the space with the regulators officially taking digital banking applications last week as hopefuls vie for one of the five licenses.