BNM tells banks to grant automatic moratorium on loan repayments

Bank Negara Malaysia (BNM) is implementing a number of measures to help bank customers facing financial issues because of Covid-19.

In a letter sighted by FMT, BNM tells all banks, Islamic banks, investment banks and prescribed development financial institutions to adopt several measures. A BNM official has confirmed the authenticity of the letter, adding that more details will be announced on Friday.

Among the measures mentioned is the granting of an automatic moratorium on all repayment of loans - principal and interests - to all small and medium enterprises (SMEs) and individuals for six months beginning April 1. This does not include credit card balances, "The automatic moratorium is applicable to loans and financing which are not in arrears exceeding 90 days as at April 1 and are denominated in Malaysian ringgit," it says. BNM says the financial institutions should also provide customers with sufficient information on how suspended repayments will be treated and the options for customers to resume payment after the moratorium ends. "For outstanding credit card balances, banking institutions shall offer borrowers the option to convert their credit card balances into a term loan of a tenure of not more than three years and an effective interest rate of not more than 13% per annum."

For individuals unable to meet monthly repayments for three consecutive months, the banks shall automatically convert their credit card balances into term loans. In the case of corporate borrowers, BNM says, banks are "strongly encouraged" to facilitate requests for a moratorium on loan repayments in a way that enables the companies to "preserve jobs and swiftly resume economic activities".

This may also include consideration for additional loans to support the companies' cash flows and rescheduling of loan repayments to help the companies recover for the disruptions to business. Another measure is to liberalise lending requirements for the purchase of shares and trust fund units. The limits for exposures to counterparties connected to Tenaga Nasional Berhad, Petroliam Nasional Berhad and Telekom Malaysia Berhad are temporarily increased from 25% to 35% of a bank's total capital, subject to certain conditions.

BNM will also provide flexibility to banks to implement remediation measures to address supervisory concern, extend timelines for regulatory and supervisory submissions and suspend enforcement actions for noncompliance with statistical reporting deadlines during this period. "Given the fluid and continually evolving environment, we will continue to monitor developments closely and consider further adjustments as may be necessary to respond to changing economic conditions.

"We urge banking institutions to use the flexibilities provided constructively to support individuals and businesses that have been hard hit by current developments," it says.