Belt & Road: commercial banks need financing flexibility

Author: Karry Lai | Published: 26 Oct 2018

Infrastructure financing can offer immense opportunities for commercial banks to participate in Belt and Road Initiative (BRI) projects but challenges remain, according to panellists at the Belt and Road Initiative: Infrastructure Financing forum on October 15 in Hong Kong.

Infrastructure loans pose a number of challenges to commercial banks and many are reluctant to lend. However, infrastructure loan-backed securities, if properly organised, can be a win-win for the capital markets, intermediaries and project owners.

"In addition to the large loan size, infrastructure loans tend to be less homogeneous and each can have their own risks which means a different corresponding structure is needed for each project," explained Norman Chan, chief executive of the Hong Kong Monetary Authority. Managing a BRI infrastructure loan portfolio requires a manager to have the relevant experience and track record. Additionally, the risk appetite of long-term investors needs to be adjusted over time. Chan said that...