On 19 November 2008, the Hong Kong Monetary Authority (HKMA) issued a reminder to authorised institutions of the need to continue to follow the "Hong Kong Approach to Corporate Difficulties" when dealing with corporate customers in financial difficulties. The Hong Kong Approach was jointly developed by the HKMA and the Hong Kong Association of Banks in November 1999. It lays down clear guidelines on how authorised institutions should handle situations where a corporate customer, who has borrowed from more than one institution, runs into financial difficulties.
One of the key guidelines is that when it becomes generally known that a borrower is experiencing financial problems, authorised institutions should not withdraw their existing facilities or hastily put the borrower into receivership, or issue writs demanding repayment. Instead, they should endeavour to ensure that the borrower has sufficient liquidity to continue trading until a considered view of its prospects can be reached. Authorised institutions are encouraged to remain supportive and be prepared to consider customers’ requests for temporary relief arrangements, such as extensions of repayment deadlines. In the event that a debt restructuring is necessary, they should follow the Hong Kong Approach and cooperate with other institutions involved in identifying a workout plan acceptable to all stakeholders.
A copy of the Hong Kong Approach to Corporate Difficulties is available on the HKMA webs