Beware of Wing Hang Bank

[fth]

Sonic - did you ever try to set up a formal meeting (but without lawyers) with the new person and their boss?

[Football16]

What is wrong with this guy posting his predicament here?

It provides good information to others who run businesses as to what current practices are or what they too might run into in their situations.

It might also be a sign that a particular bank is tightening or does this sort of thing to get the business in the door and then makes demands for deposits knowing full well with the way the guy has his business structured he is not in a position to move to another bank easily. Given the way things work in HK this might very well be a tactic that others at their bank are facing.

I might not have used his title but the only "wingeing" on this thread seems to be Boris complaining about the topic ad nauseum.

[fth]

Not sure about the regulatory capital point: Under most regulatory regimes the capital required for government backed securities is small, making lending to borrowers with government support (guarantee, insurance, etc.) at above government rates a fairly profitable business - but not entirely sure about the situation in Hong Kong.

Under Basel I indeed it was generally 0% for government bonds. My understanding of the scheme from the link below is that the guarantee is capped at 50% of the loan amount leaving the other half unsecured, and therefore requiring an equity allocation. If the loan is now 100% cash collateralized it could be way over collateralized as the loan is backed with cash held inside the bank (generally considered risk free), with govt insurance on top. There may be a small niggle with the insurance as I don't think it pays out immediately on default.

http://www.legco.gov.hk/yr02-03/engl...rs/f02-53e.pdf

[sonic-dragon]

Sonic - did you ever try to set up a formal meeting (but without lawyers) with the new person and their boss?

Yes, tried that, but they only offered a meeting at the branch where we have the account.

[carang]

sorry, maybe i'm dense, but i have a question:

the loan is to a LIMITED liability company, right?
so why are they asking you PERSONALLY to put up money???

i thought the whole point of having an LTD company was to reduce the personal risk?

[sonic-dragon]

Latest update: The directors provided to the bank documentation showing a combined personal net worth exceeding 25x the loan amount outstanding. Bear in mind we all have joint unlimited guarantees for the loan. They didn't budge on their "request" for personal deposits. Following the meeting with our solicitor, and also another meeting with our auditor, where the audit partner who handles finance companies also attended at our request, we decided to politely decline their request for the directors personal deposit. It was the general opinion of the solicitor and auditor that the bank's attitude on this falls well outside the "spirit" of the SME loan scheme, though (and only arguably) within the terms of the loan agreement. The point being that the way the relevant clause is drafted we can argue that none of the original information we provided is invalid - simply new information has come to light for a later period. It is also quite damning on the part of the bank that they did not inquire or ask for any interim unaudited accounts or management accounts for the 1 year period following the date of audited accounts that we originally provided (Mar 2008) up to the time the loan was agreed (April 2009). Consensus was that a responsible bank ought to have at least asked for proforma unaudited accounts for 2009 or at least 1H 2009. Yet they asked for nothing. Now bearing in mind that we had a financial and economic crisis during that period, it seems quite absurd that they did not ask for anything, and even more absurd that they make these requests on us after a posting a negligible pretax loss after an unblemished history of making the loan repayments.

So we actually hope that they do call for early repayment, as we also feel we have a strong case for not paying early repayment fees in that case, and we will just make a directors loan to the company and repay the bank term loan.

One more point - we are paying 7% interest on this loan. You'd think they would accept some degree of risk for that wouldn't you ? But it seems they want to earn 7% and have close to a risk free return. Nice business if you can get it !

[Oldtimer]

sorry, maybe i'm dense, but i have a question:

the loan is to a LIMITED liability company, right?
so why are they asking you PERSONALLY to put up money???

i thought the whole point of having an LTD company was to reduce the personal risk?

If you borrow from the bank , you have to give personal guarantee.
Even for the mortgage property personal guarantee is required.

Only unsecured creditors of a Limited company have no recourse to the directors and shareholders.

[carang]

ok, thanks! although i'm now on my second LTD company, we've never borrowed $... so no experience of it.

[Boris]

I might not have used his title but the only "wingeing" on this thread seems to be Boris complaining about the topic ad nauseum.

Two comments out of 37 posts is " ad nauseum " ?
Must be great writing!

[fth]

If you borrow from the bank , you have to give personal guarantee.
Even for the mortgage property personal guarantee is required.

Only unsecured creditors of a Limited company have no recourse to the directors and shareholders.

Not always and not in every jurisdiction. If the company is large enough a directors guarantee is rarely requested. Do you think in the case of all the leveraged buy-outs directors' personal guarantees were given?

In sonic's case without being able to see sonic's accounts or the loan amount myself there could be a few things going on, such as....

1) The bank is trying to delever and is trying to call in the loans on smaller borrowers which are less profitable

2) There is a new account manager, he may be being a bit of an ar*e and is trying to "save face"

3) Depending on sonic's business there could have been a change in bank lending policy to reduce exposure to the sector by all possible means