The Hong Kong Monetary Authority (HKMA) said Friday it will maintain a loose monetary environment for the city's banks to help alleviate the impact of the global financial crisis and the economic slowdown amid the challenging environment.

The performance of Hong Kong banks in 2008 were not as good as in the previous year, with the net interest margin narrowing to 1. 84 percent from 1.90 in 2007, HKMA Deputy Chief Executive Choi Yiu- kwan told a press conference on Friday.

"The profitability of the banking sector in 2008 was affected by the global financial crisis," Choi said, adding that some of the local banks could even record losses for 2008.

The cost-to-income ratio of the authorized institutions in Hong Kong rose from 40.5 percent to 45.2 percent. And the number of negative equity mortgages surged to 10,949 from 1,861, a reflection of a declining real property market.

However, the mortgage delinquency ratio declined from 0.11 percent in 2007 to 0.05 percent in December 2008, and the credit card charge-off ratio was also down from 2.9 percent to 2.72 percent.

The average consolidated capital adequacy ratio (CAR) was 13.8 percent in September last year, compared with 13.4 percent in the previous year.

The impact of "toxic assets" on local banks was limited, Choi said.

Looking ahead, Choi said the HKMA expects the local banking system to remain stable but challenges will also be inevitable.

The HKMA, the de facto central bank of Hong Kong, will maintain a loose monetary environment.

Some of the major issues to be dealt with include the Lehman Brothers issue, a review of the scope of the deposits guarantee scheme expected in the second quarter.

The HKMA announced late last year that it would fully guarantee bank deposits, which was seen as a move to restore confidence in the banking system.

(Xinhua News Agency February 14, 2009)