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Is it just me or have international banks tightened their credit risk?

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  1. #1

    Join Date
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    Is it just me or have international banks tightened their credit risk?

    Lot's of activity with SCB and HSBC around credit limit reductions, closing credit cards and getting annual fees I have seen first hand with myself and with my associates. Looks like Covid-19 and the Trade War are bigger head winds than the banks would like to admit. I have not seen the same with pure play Credit Card companies or local banks in the region.

    Seems like highly prudent risk tightening and improving their overall financial health. This is going to be a brutal year for the international banks/ universal banking model's with a heavy reliance on Asia.


  2. #2

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    Looks like Covid-19 and the Trade War are bigger head winds than the banks would like to admit.
    There was some news earlier in the local press about many tier 1 banks tightening up mortgage risk scoring. I guess this is part 2 of de-risking?

    Was what you witnessed on credit cards where the card holder has a bank account with the card issuing bank or just pure credit card accounts?

  3. #3

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    combination of alot of things.. internal risk matrix is probably one of the key.. after so many years of planning and execution banks are putting more market related cost into lending. so the spread between a good borrower and a bad borrower widens..
    then if you are not going to use your credit card, why would they want to extend high limits to you so that you clock up their limits and yet don't generate revenue for them ? ...

    is it brutal ? not sure.. i think there are bad debts here and there. but they are also able to charge higher spreads on many borrowers instead of the dead low margin for the last 3 years.


  4. #4

    I'd be astonished if they haven't.

    A number of central banks have ordered banks to preserve capital (in spite of already having "unquestionably strong" balance sheets). In some places (e,g, UK and NZ) they've also been ordered not to pay dividends. An inevitable consequence is that banks will look to reduce lending which is given higher risk weighting under BASEL III. Unsecured loans would be one of the first things they will look at.

    There are also relief measures, such as loan deferral, which impact cash flow and loan duration - effectively leaving money out there rather than having it repaid. For banks looking to preserve their capital ratios, this means less money available for lending.

    The lower interest rate environment (negative rates in some places) have also squeezed bank margins. One of the generally unspoken consequences is that the banks have less room to absorb losses from defaulting borrowers. I'd assume this means they will be more stringent in granting credit going forward than they have in the past.

    shri, pin and TheRoadAhead like this.

  5. #5

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    Quote Originally Posted by shri:
    There was some news earlier in the local press about many tier 1 banks tightening up mortgage risk scoring. I guess this is part 2 of de-risking?

    Was what you witnessed on credit cards where the card holder has a bank account with the card issuing bank or just pure credit card accounts?
    Long term customers with multiple services signed up with the banks - including brokerage. Mostly expats though, so it could be on a smaller scale. Would be interested to know if this is also the case for local customers?
    shri likes this.

  6. #6

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    This is the hyperactive local credit card forum.

    I cannot translate or read it ...

    https://www.hongkongcard.com/forum/show/30302?page=1