HKMA denies "bad bank" rumors

The Hong Kong Monetary Authority denies rumours on local banks forming a "bad bank."

The city's de facto central bank said it has no plans to set up a “bad bank” and understands local lenders have no such intention either. 

Earlier,  Bloomberg reported, citing sources, that some major Hong Kong banks, including Hang Seng Bank (0011) and Bank of Communications (3328), are in early talks with consultants about setting up a "bad bank" to manage growing volumes of non-performing loans.

The report said one proposal under consideration is to create an asset management company modeled after those in mainland China, allowing banks to recover at least part of the defaulted loans.

HKMA called related reports unfounded, citing the banking sector’s sound asset quality, adequate provisions, and a credit coverage ratio above 140 percent.

STAFF REPORTER