Banks in Hong Kong are regulated by the Hong Kong Monetary Authority (HKMA), which aims at ensuring the stability and smooth operation of the banking system. HKMA is concerned that each bank should have an appropriate system of risk management and requires banks in Hong Kong to collect and give careful consideration to all relevant information on every loan application.
To perform credit assessment, a bank will follow its approval procedure which involves an analysis of the mortgagor's and any related party's (such as the guarantor's) financial position and background, the purpose of the loan and the value of the property being mortgaged.
Banks are required to consider the borrower's integrity and employment aspects. If the borrower is a corporate entity, the bank should inquire into its authority to borrow, its business expertise, the viability of its business and its management capability. The bank should also consider the prospects of the industry in which the borrower is engaged.
Banks may also consider the following when assessing the credit risk of any mortgage loan: