The impact of the Asian financial crisis on Hong Kong’s real estate market in 1997 led to a sharp drop in housing loans. To seek new profit growth, financial institutions in Hong Kong have vigorously expanded the credit card market to develop consumer credit. However, the excessive development of the credit card market in 2000-2001 foreshadowed a subsequent credit card crisis, which was manifested in the deterioration of credit card loan quality, the shrinking of credit card loan scale, and the increase of personal bankruptcies related to credit cards.
There are three main reasons for the credit card crisis. Firstly, Hong Kong's credit card laws and regulations are not perfect, and the regulatory authorities did not strengthen supervision of card issuers considering the financial environment after the financial crisis. Secondly, banks excessively develop credit card business and pay too much attention to competition to seize market share while neglecting risk control; Thirdly, due to income reduction, policy, public opinion and other reasons, consumers' repayment ability and repayment willingness are both reduced.
Hong Kong regulators have introduced a series of measures in response to the crisis. To address the previous lack of supervision of the credit card market, a systematic credit card supervision method has been introduced. To address the problem of insufficient risk control of banks, the risk control was strengthened by sharing positive credit data and urging banks to actively use credit data. For consumers affected by the economic crisis caused a variety of debt restructuring has been undertaken to reduce the repayment and debt problems. Through a series of efforts, the credit card crisis turned around significantly in 2004.
The credit card crisis in Hong Kong and the effective response of the government can be used for reference to the credit card and consumer credit market in mainland China. Firstly, the special legislation on credit card and consumer protection in China is not perfect at present, and the relevant laws and regulations need to be improved. Secondly, in the current consumer credit booming background, sharing credit data to strengthen the risk control to suppress bad debts is a problem worthy of attention; Finally, although the current law in China does not support personal bankruptcy, it should provide multiple debt solutions such as debt restructuring for the borrowers who cannot repay their debts to maintain the order of the whole market.
