ABM: Banks’ asset quality issue to be temporary

PETALING JAYA: The Association of Banks in Malaysia (ABM) anticipates that any adverse asset quality issues from the moratorium on loan and interest repayments implemented by Bank Negara Malaysia (BNM) will be relatively short-lived and temporary in nature.

“Banks acknowledge the vast majority of customers act responsibly on repayments, and apart from adverse circumstances (illness, marital status change, loss of jobs), we have no reason to believe there will be a change in this behaviour. The moratorium is the best measure to provide greatest assurance of job preservation in the midst of personal financial adjustment. It is also in the best interest of all that everyone is back to full employment,“ABM said in a statement.

In the meantime, ABM has presented a number of requests to BNM, specifically in respect of the recognition and classification of assets, policies regarding MFRS9, liquidity and capital, as well as market behaviour concerning deposit taking activities.

“While these are in discussion, ABM would like to give the assurance that these requests, if granted, will not pose undue risks to the financial industry in Malaysia, given that banks have been prudent in managing their capital levels beyond regulatory requirements,“it added.

ABM has from the outset been in discussion with BNM on possible measures that can be taken to address the impact of Covid-19, particularly looking at how borrowers can be provided relief even as the government focuses on combating the spread of the virus and ensure the country’s economic growth is sustained.

“ABM member banks are in full agreement of the intent of the moratorium announced by BNM which we believe is a necessary solution at this point. We are currently working out the full details of the proposals to ensure they will be efficiently executed with minimum inconvenience to customers.”

Effective April 1, an automatic extension of credit facilities will be granted for a period of six months to retail (excluding credit cards) and SME customers.

While interest will accrue during this moratorium period, there will be no payment of interest and principal required for credit facilities for the six-month period.

As for the segments other than these, the moratorium will apply on a case-to-case basis and customers should be in touch with their bankers to discuss the specific relief sought.