Banks can weather six-month moratorium

26 Mar 2020 / 09:51 H.

PETALING JAYA: Banks should be able to manage their finances despite offering a six-month moratorium on loans and repayments. The move is expected to save thousands from retrenchment and help spur spending.

This was the general consensus among experts in the field who commended Bank Negara Malaysia (BNM) on its announcement yesterday, which aims to ease the burden of individuals and businesses in light of the Covid-19 outbreak.

Macro financial analyst Prof Dr Hoo Ke Ping said the move would ensure that the number of non-performing loans (NPL) do not increase substantially, while also avoiding the potential of economic failure.

“Already, many individuals and businesses are affected. If BNM hadn’t announced such a measure, NPLs and unemployment rates will increase, and there will be social disorder.

“So I would say the move is very positive for the market, people and even banks,” he said yesterday.

Hoo said the six-month moratorium could easily save up to one million jobs, particularly those in small and medium enterprises (SMEs).

He does not believe the move would affect investors’ confidence in the country’s financial institutions, pointing out that their stocks were already undervalued since the beginning of the outbreak, and that any impact on banks would be minimal.

In its announcement, BNM said the moratorium would start on April 1 and is applicable to loans and financing that are not in arrears exceeding 90 days, with credit card holders facing outstanding balance payment difficulties also allowed for scheduled repayments.

Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the move would certainly improve cash flow among households and businesses.

He said as banks would also not be required to classify these accounts as impaired due to NPL, there would be no additional loan loss provisions to be made, subsequently maintaining the banks’ bottomline and earnings.

In addition, he noted that banks would be able to expand their asset growth by extending loan or financing tenure by way of restructuring and rescheduling, while customers would enjoy lower instalments.

“But what is more important now is for customers to manage their extra income arising from this exercise. Perhaps, they should consider investing some of their savings in instruments that are suitable with risk tolerance.”

Meanwhile, in a statement, the Association of Banks in Malaysia (ABM) said the moratorium was the best measure to provide assurance of job preservation in the midst of personal financial adjustment.

It said the move announced by BNM was “a necessary solution at this point”, and that it was fully supportive of the proactive measures to mitigate the economic impact.

ABM explained that the automatic moratorium would be available to retail and SME customers, and for other segments, it would be on a case-by-case basis, with customers urged to contact their respective banks for negotiation and clarification.

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