Hong Kong to cut capital charges on loans to Northern Metropolis university towns

Hong Kong’s de facto central bank plans to introduce legislative amendments in the first quarter of next year to lower the capital costs for banks lending to local tertiary institutions, in a bid to speed up development of the university towns in the Northern Metropolis.

Under the proposed changes to the Banking (Capital) Rules, the Hong Kong Monetary Authority (HKMA) will designate 11 post-secondary institutions and three park companies as “Domestic Public Sector Entities”, granting them preferential risk-weighting treatment under the standardised credit risk framework.

“This measure will help lower banks’ capital costs, assist these entities in obtaining bank financing, and thereby accelerate the implementation of Northern Metropolis projects,” the authority said on Tuesday.

The authority intends to submit the amendments to the Legislative Council in the first quarter of next year, with a view to their taking effect in the second quarter.

The amendments follow a meeting on Tuesday at which the Education Bureau briefed 25 commercial banks on the latest developments in the Northern Metropolis university towns, covering the positioning of the three towns, the development of campus areas and the related financing arrangements.

It was the third meeting convened by the Northern Metropolis Financial Advisory Task Force, which the authority and the Hong Kong Association of Banks set up to explore financing solutions for the megaproject, estimated to cost at least HK$224 billion (US$28.6 billion).

“Meeting participants discussed and offered professional advice on feasible financing solutions for the Northern Metropolis University Town Area, such as loans and public-private partnerships,” the authority said.

“The participating banks in the task force expressed their commitment to provide suitable financial services to support the synergistic development of the NMUT and its surrounding industry parks and projects.”

The government plans to develop three self-financed university towns, with a core campus area totalling about 300 hectares, in the Northern Metropolis near the border with mainland China, to foster collaboration among industry, academia and research.

The three are the 26-hectare Hung Shui Kiu university town, the 100-hectare San Tin university town and the 180-hectare Ta Kwu Ling university town. The government has earmarked a HK$10 billion loan scheme for the first of these.

At a meeting of Legco’s financial affairs panel last Friday, Arthur Yuen Kwok-hang, deputy chief executive of the authority, said listing nine universities and two post-secondary colleges as public sector entities under its Banking (Capital) Rules would make it considerably easier for them to secure financing for developments in the university towns.

Several university leaders and lawmakers have called for more government financial support, arguing that the HK$10 billion loan quota is insufficient.

On Friday, Secretary for Education Christine Choi Yuk-lin pledged to seek additional funding from the financial secretary if institutions approved to set up in the first university town needed more than the HK$10 billion earmarked for loans.

She added that the bureau would line up different government departments to form platforms so that institutions could pitch development proposals to potential investors and secure flexible financing.

In August, Chinese University of Hong Kong (CUHK) vice-chancellor Dennis Lo Yuk-ming argued that construction costs in Hong Kong were high and the HK$10 billion committed for loans was insufficient, citing CUHK’s new medical building, which cost more than HK$3 billion, as an example.

He said universities were eager to discuss funding arrangements further with officials.