VIA a circular dated March 24, Bank Negara Malaysia (BNM) announced that it is implementing additional measures to assist borrowers and customers experiencing temporary financial constraints due to Covid-19.
“These measures aim to ensure that the financial intermediation function of the financial sector remains intact, access to financing continues to be available, and banking installations remain focused on supporting the economy during these exceptional circumstances,” said the bank.
The first measure implemented is a moratorium on repayment, payment of loans and financing, aimed at easing the cash flow of small-and-medium enterprises (SMEs)and individuals likely most affected by Covid-19.
Banking institutions will grant an automatic moratorium on all loans, financing repayments, payments, principal, and interest by individuals and SMEs for six months from April 1. This does not, however, include credit card balances. The automatic moratorium is applicable to loans or financing that are not in arrears exceeding 90 days as at April 1, and denominated in ringgit.
Credit card balances will see banking institutions offering the option to convert those into term loans/financing of a tenure not more than three years, with an interest rate no higher than 13% per annum. Individuals who have shown difficulty meeting minimum payments for the last three months will automatically see the balances converted to term loans. Banks are required to do this starting April 1 until Dec 31, with the option to extend the options up to the banks.
Banks are also “strongly encouraged to facilitate requests for a moratorium for corporate borrowers in a way that enables viable corporations to preserve jobs and swiftly resume economic activities once things improve. This may include the appropriate consideration of additional financing to support immediate cash flows and the rescheduling and restructuring of existing facilities to allow a reasonable time for businesses to recover.”
Corporates will find that the period of the moratorium is excluded in the determination of the period in arrears for the purpose of regulatory and accounting classifications, with loans not needing to be declared as rescheduled and restructured (R&R) in the Central Credit Reference Information System (CCRIS) and that any R&R loans will not be classified as credit-impaired in CCRIS.
Lending and financing limits will also be liberalised, with the requirements on lending or financing to the broad property sector and for the purchase of shares and units of unit trusts being uplifted with immediate effect. The limit for exposure to counterparties connected to Tenaga Nasional Bhd, Petroliam Nasional Bhd and Telekom Malaysia Bhd will also be increased temporarily to 35% of a bank’s total capital.
This is accentuated by a drawdown of prudential buffers, which allows banks to draw down the capital conservation buffer of 2.5%, operate below the minimum liquidity coverage ratio of 100%, and reduce the regulatory reserves held against expected losses to 0%. Banks will also be given reasonable time to rebuild their buffers after Dec 31, with BNM expecting that banks would recover by Sept 30, 2021.
The Net Stable Funding Ratio requirement will also be implemented, effective from July 1, but the minimum requirement applicable on that date is also lowered to 80%.
Banks will also see BNM suspending any new statistical reporting requests, other than those required to address the impact of Covid-19, with the central bank also providing flexibility in the timelines for banks to implement remediation measures to address supervisory concerns.
Deadlines for banks to respond to consultations on discussion papers and exposure drafts will also be extended, along with the timelines for regulatory and supervisory submissions to BNM. Timelines for most statistical submissions will also be extended, and enforcement actions for non-compliance with statistical reporting deadlines have also been suspended. – March 24, 2020
