Hong Kong asks banks to report exposure to Evergrande

Banks given 24 hours to respond on financial commitments to indebted developer

A worker  in front of the Evergrande headquarters in Shenzhen, China’s southern Guangdong province. Photograph: Noel Celis/AFP via Getty Images

A worker in front of the Evergrande headquarters in Shenzhen, China’s southern Guangdong province. Photograph: Noel Celis/AFP via Getty Images

 

Hong Kong’s central bank has asked lenders to report their exposure to debt-laden China Evergrande Group on concern over potential systemic risks to the region’s financial system, according to people familiar with the matter.

The Hong Kong Monetary Authority (HKMA) queried lenders in the city last week, giving them 24 hours to respond on their financial commitments to China’s most indebted developer, both in terms of lending and derivatives, one of the people said, asking not to be named because of confidentiality.

It is at least the second time in recent months the authority took an interest in how banks are exposed to Evergrande as financial markets are bracing for a potential collapse of the developer, which is buckling under more than $300 billion in liabilities. The company is China’s largest issuer of high-yield dollar-denominated bonds, and bills are coming due to an array of banks and suppliers.

In July the HKMA asked banks to explain their decision to halt mortgages on Evergrande’s unfinished property projects.

The HKMA did not immediately respond to a request for a comment.

Evergrande missed interest payments due last week to at least two of its largest bank creditors, people familiar with the matter have said.

So far lenders in the region have downplayed any danger. HSBC Holdings Plc, the biggest bank in Hong Kong, had yet to see any direct impact from the escalating problems at Evergrande, chief executive officer Noel Quinn said at a conference last week.

Collateral

China’s publicly-traded banks have also sought to assuage investors about risks from the deepening crisis. At least 10 lenders told investors earlier this month that they have sufficient collateral for loans to the developer and that risks are under control.

China Minsheng Banking Corp, which topped the list of Evergrande’s principal banks at the end of last year, said its exposure to the firm had dropped about 15 per cent from June last year, and most of the loans have land, properties or projects under construction as collateral.

Singapore’s largest lender, DBS Group Holdings, which operates in Hong Kong and the mainland, has no exposure to Evergrande and does not see the crisis as a systemic risk to the region’s banking industry, chief executive officer Piyush Gupta said in a Bloomberg Television interview Monday. – Bloomberg