Annex 2 HKMA’s prudential measures on loan-to-value ratio and debt-servicing ratio for property mortgage loans As of 22 February 2013 1 Table 1A: Maximum loan-to-value ratio (applicable to applicants without outstanding mortgage) Residential properties Self-use Non-self-use or company held Commercial and industrial properties, standalone car park space Property value Applicants’ income mainly derived in Hong Kong (HK) Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK (A) Debt-servicing ratio (DSR)-based lending < HK$7 million 70% (subject to a loan cap of HK$4.2 million) 60% (subject to a loan cap of HK$3.5 million) ≥ HK$7 million but < HK$10 million 60% (subject to a loan cap of HK$5 million) 50% (subject to a loan cap of HK$4 million) ≥ HK$10 million 50% 40% 50% 40% Commercial and industrial properties: 50%  40% Standalone car park space: 40% Commercial and industrial properties: 40%  30% Standalone car park space: 30% (B) Net-worth-based lending Regardless of property value 40% Commercial and industrial properties: 40%  30% Standalone car park space: 30%

• New regulatory requirements after the latest round of prudential measures introduced on 22 February 2013 are marked in red for ease of reference.

2 Table 1B: Maximum loan-to-value ratio (applicable to applicants with outstanding mortgage(s)) Residential properties Self-use Non-self-use or company held Commercial and industrial properties, standalone car park space Property value Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK (A) DSR-based lending < HK$7 million 70% (subject to a loan cap of HK$4.2 million) 50% (subject to a loan cap of HK$2.8million) ≥ HK$7 million but < HK$10 million 60% (subject to a loan cap of HK$5 million) 40% (subject to a loan cap of HK$3 million) ≥ HK$10 million 50% 30% 50% 30% Commercial and industrial properties: 50%  40% Standalone car park space: 40% Commercial and industrial properties: 30%  20% Standalone car park space: 20% (B) Net-worth-based lending Regardless of property value 30% Commercial and industrial properties: 30%  20% Standalone car park space: 20%

• New regulatory requirements after the latest round of prudential measures introduced on 22 February 2013 are marked in red for ease of reference.

3 Table 2A: Maximum debt-servicing ratio (applicable to applicants without outstanding mortgage) Residential properties Self-use Non-self-use or company held Commercial and industrial properties, standalone car park space Debt Servicing Ratio (DSR) Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Base-DSR cap 50% Stressed-DSR cap 60% 60% based on 200 bps  based on 300 bps interest rate hike interest rate hike Table 2B: Maximum debt-servicing ratio (applicable to applicants with outstanding mortgage(s)) Residential properties Self-use Non-self-use or company held Commercial and industrial properties, standalone car park space Debt Servicing Ratio (DSR) Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Applicants’ income mainly derived in HK Applicants’ income mainly derived from outside HK Base-DSR cap 40% Stressed-DSR cap 50% 50% based on 200 bps  based on 300 bps interest rate hike interest rate hike

• New regulatory requirements after the latest round of prudential measures introduced on 22 February 2013 are marked in red for ease of reference.

4 Table 3: Summary of exemption arrangements (A) Loan-to-value (LTV) ratio limit reduction Prudential requirement Exemption arrangements For applicants whose income is mainly derived from outside Hong Kong, the applicable LTV ratio limits will be reduced by: (i) 10 percentage points for those without outstanding mortgage; and (ii) 20 percentage points for those with outstanding mortgage(s) Mortgage applicants will not be subject to the requirement if they can demonstrate having a close connection with Hong Kong, e.g. (i) the applicants are seconded by local employers to work outside Hong Kong with documentary proof provided by the employers; or (ii) the applicants’ immediate family members (i.e. parents, spouse, and descendants) are residing in Hong Kong (B) Debt-servicing ratio (DSR) limit reduction Prudential requirement Exemption arrangements For applicants with outstanding mortgages, the applicable base-DSR limits and stressed-DSR limits will be reduced by 10 percentage points. Mortgage applicants will not be subject to the requirement under the following circumstances: (i) Applicants with one outstanding property under mortgage at the time of mortgage loan application and the new mortgage loan is for:

• financing the purchase of a new property as a replacement of the existing mortgaged property, and the outstanding mortgage loans of the existing property will be repaid in full within 6 months upon the drawdown of the mortgage loan for the new property;
• financing the purchase of a new self-use property#;
• cash-out refinancing loans secured by the existing mortgaged property; or
• refinancing loans on the existing mortgaged property with no cash-out. (ii) Applicants with two or more outstanding properties under mortgage at the time of mortgage loan application and the new mortgage loan is for refinancing loans on the existing mortgaged properties with no cash-out.

“Self-use” refers to occupancy by owners or their immediate family members (i.e. parents, spouse, children and siblings), or by the majority shareholder or his/her

immediate family members if the property is held through a shell company.