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South China Morning Post

HKMA dismisses ‘bad bank' rumours, saying industry remains healthy

The Hong Kong Monetary Authority (HKMA) , the city's de facto central bank, said it had no plans to establish a 'bad bank' to absorb troubled debt in the financial system, saying that the local banking sector remained healthy and profitable. Advertisement 'Overall, banks in Hong Kong maintain a healthy balance sheet; their credit risk is manageable and provisions are sufficient,' the authority said in a statement on Thursday. 'The HKMA has no intention to set up the rumoured 'bad bank'. We understand that the relevant banks also do not have such a plan.' The banking regulator saw no need to create a bad bank, as the current provisions for bad debts at banks were already sufficient, an HKMA representative added. The HKMA's statement came hours after a Bloomberg report, citing unnamed sources, indicated that Hang Seng Bank, Bank of Communications, and other lenders were in discussions about creating a bad bank. A bad bank is typically set up to buy non-performing loans and other bad debts to clean up the balance sheets of another bank. The logo of Hong Kong Monetary Authority is seen at its office in Central. Photo: Yik Yeung-man The Bloomberg report, citing Fitch Ratings estimates, said that soured loans in Hong Kong climbed to US$25 billion at the end of March, representing 2 per cent of the total and reaching a two-decade high.