Hong Kong’s central bank has asked lenders in the city-state about their financial exposure to shaky real estate group China Evergrande Group. They have 24 hours to come up with an answer, Bloomberg news agency writes based on insiders.
This is not the first time the Hong Kong Monetary Authority (HKMA) has asked about the ties between banks and Evergrande this year. This summer, the regulator asked financial service providers to explain the termination of mortgages for Evergrande projects that had not yet been completed.
Evergrande is a giant player in the Chinese real estate market with construction projects in hundreds of cities in the Asian country. The conglomerate borrowed a lot of money to grow, but the debt mountain of approximately 260 billion euros now seems unsustainable. Suppliers are still waiting for their money, and last week the company let an interest payment on bonds expire.
So far, banks operating in the region have mainly reassured markets about the impact of Evergrande’s bankruptcy on their own balance sheets. HSBC said last week it was not experiencing any direct impact from the problems. At least ten Chinese listed banks reported having received enough collateral for loans to Evergrande and that risks are manageable.
China’s central bank has previously pledged to do everything it can to ensure a “healthy real estate market” and protect home buyers. Policymakers also gave the banking system another injection of cash to absorb shocks.