For the first five months, the number of bankruptcies nearly tripled to 8,104 cases from 2,738 in the same period last year. A total of 9,151 cases were registered in all of last year, which was already a record.

Given the current economic environment, analysts expected the rise in bankruptcies will not abate until late this year.

Hong Kong is struggling with its second recession in four years as its economy has shrunk in three consecutive quarters.

The jobless rate reached a record-high of 7.1 percent in April, making more people unable to pay their debts.

The surge was also a result of the relaxation of bankruptcy laws and banks' aggressive policy to issue loan and credit cards. The government in 1998 decided to allow bankrupt individuals to start borrowing again after four years instead of the previous eight.

With a population of 6.8 million, Hong Kong had 9.38 million credit cards in circulation at the end of March, according to Hong Kong Monetary Authority (HKMA).

With the rising bankruptcies, Hong Kong banks have to set aside more provisions this year for bad debts, especially credit card delinquencies.

Investment bank Merrill Lynch has lowered its 2002 earnings forecast for Hong Kong banks by 15 percent on weak loan demand and higher bad debt charges.

"The ongoing absence of loan growth, margin pressures and rising consumer bad debts conspire to force us to lower our earnings expectation for 2002 by as much as 15 percent," Keith Irving, head of Merrill Lynch's Asia Pacific financial institutions research, said in a report released on Monday. "We now expect most banks to deliver a further year of negative progression this year," Irving said.

The annualized credit card write-off ratio climbed to 9.04 percent in the first quarter of the year from 8.27 percent in the last quarter of 2001, according to the HKMA.

To address the problem, banks agreed earlier this year to share positive data of their customers. The government expects the credit bureau would be set up in the third quarter of this year after the Privacy Commission completes its public consultation on the move.

But a survey by Hong Kong's Democratic Party found last month that nearly 74 percent of 640 respondents opposed the idea.

(China Daily Hong Kong Edition June 12, 2002)