The Hong Kong Monetary Authority (HKMA) is stepping up its supervision of Hong-Kong-based banks' credit risk management by asking them to show stable funding requirements and agree to regular onsite examinations of credit underwriting processes and stress-testing, the HKMA said in a statement.

These measures come after a steep rise in offshore lending to mainland companies by Hong Kong-based banks. Chinese onshore companies borrowed HK$2.276 trillion ($293.52 billion) of customer loans at the end of 2013, excluding HK$313 billion of trade finance loans, according to the HKMA.

"The increase in the Hong Kong banking sector's mainland-related lending is a natural consequence of the growth of the mainland economy and development of mainland corporates," said the HKMA, which reinforces Hong Kong's role as a significant international financial centre.

Hong Kong banks' exposure to Chinese companies has soared since mid 2013.

Reuters
Newspaper headline: HKMA steps up scrutiny of banks' risk controls