The banking sector today launched a scheme to alleviate the cashflow pressure faced by corporate customers in light of the economic challenges brought about by the COVID-19 outbreak.

Jointly announced by the Monetary Authority and the Banking Sector SME Lending Coordination Mechanism, the Pre-approved Principal Payment Holiday Scheme is estimated to cover more than 80% of all corporate borrowers in Hong Kong.

All corporate customers that have an annual sales turnover of $800 million or less and with no outstanding loan payments overdue for more than 30 days are eligible for the scheme.

Eligible customers’ loan principal payments due within a six-month period between May 1 and October 31 this year will be pre-approved for deferment.

The loans’ principal payments, including revolving facilities, will generally be deferred by six months, whereas trade facilities, given their short-term nature, will be deferred by three months.

The scheme does not cover syndicated loans or loans used for financing purchases of shares or other financial assets.

Banks will begin informing eligible customers of the pre-approval under the scheme as soon as practicable. Eligible customers do not need to apply. They only need to contact the bank within 14 days of the bank’s notice to confirm the detailed arrangements.

The authority has issued a circular requesting all banks to participate in the scheme and has received support from all 11 major lenders in the co-ordination mechanism.

It will monitor the scheme’s operation and maintain close dialogue with banks.