KUALA LUMPUR, March 24 — Bank Negara Malaysia (BNM) tonight has ordered an automatic six-month moratorium on all bank loans — except for credit card balances — for those affected by the Covid-19 outbreak.

In a statement by the central bank’s deputy governor Jessica Chew, BNM said the measure was designed to ease the cash flow of small and medium-sized enterprises and individuals that are likely to be most affected by Covid-19.

"Banking institutions will grant an automatic moratorium on all loan/financing repayments/payments, principal and interest (except for credit card balances) by individuals and SME borrowers/customers for a period of six months from April 1, 2020,” the statement read.

The moratorium was among the additional measures announced by BNM, which it said are designed to ensure that "the financial intermediation function of the financial sector remains intact, access to financing continues to be available and banking institutions remain focused on supporting the economy during the exceptional circumstances”.

The moratorium is automatically applicable to loans and financing that are not in arrears exceeding 90 days as at April 1, 2020 and is denominated in Malaysian Ringgit.

Banks are also encouraged to extend the moratorium to corporate players if they have proven to be a viable investment in the past.

""For corporate borrowers/customers, banking institutions are strongly encouraged to facilitate requests for a moratorium on loan/financing repayment/payment in a way that will enable viable corporations to preserve jobs and swiftly resume economic activities when conditions stabilise and improve.

"This may also include the appropriate consideration of additional financing to support immediate cashflows and the rescheduling and restructuring of existing facilities to allow reasonable time for businesses to fully recover from current disruptions,” said Chew.

BNM have tasked the banks to provide its customers with information on how the suspended loan/financing payments/repayments will be treated during the six months’ period and the options available for them to resume payment once the period is over.

However, a footnote at the letter pointed out that there will still be an accrual of interest.

For outstanding credit card balances, BNM has instructed banking institutions the option to convert their credit card balances into a term loan/financing tenure of not more than three years with an effective interest/profit rate of not more than 13 per cent a year.

For individuals who have been unable to meet their payments for the last three consecutive months, banks will automatically convert their credit card balances into term loans. The period for the credit card will be observed by banks from April 1 to December 31 this year.

Banking institutions may also extend these options beyond the end of this year in the interest of their borrowers and customers.

At the same time, some lending and financing requirements have been liberalised to further support such activities by banking institutions.

This includes the requirements on lending and financing to the broad property sector as well as lending and financing for the purchase of shares and units in unit trusts which have been lifted with immediate effect.

The limit for exposures to counterparties that are connected to TNB, Petronas and Telekom have been temporarily increased to 35 per cent from 25 per cent of a banking institution’s total capital.

However, this is still subjected to the following: the higher limit is only applicable for exposures acquired until December 31, 2021; and that banking institutions must pare down any exposures in excess of 25 per cent of total capital by December 31, 2022.

Banks taking advantage of the liberalisation must still continue to ensure appropriate risk assessments and the monitoring and independent review of exposures in line with the Credit Risk policy expectations.

At the same time, during the six months’ period banks are also allowed to drawdown the capital conservation buffer of 2.5 per cent, operate below the minimum liquidity coverage ratio (LCR) of 100 per cent and reduce the regulatory reserves held against expected loss to 0 per cent.

"Banking institutions will be given reasonable time to rebuild their coffers after December 31, 2020. At this juncture, BNM expects that, subject to the public health concerns abating and economic conditions improving thereafter, banking institutions should be in a position to restore their buffers to the minimum regulatory requirements by September 30, 2021.

"BNM will review this timeline if current expectations change materially. BNM will also consider the extent to which individual banking institutions draw down their liquidity buffer.

"Where BNM judges that liquidity risks of an individual banking institution are significantly heightened due to a lower-than-expected-LCR level, BNM may subject the institution to closer monitoring and/or require the institution to restore its liquidity buffer more quickly to an acceptable level,” said Chew.

To enable banking institutions to focus their efforts on their customers, the central bank has also promised for the moment to suspend any new statistical reporting requests barring those require to address Covid-19’s impact.

Among other efforts to ease the difficulties faced by the banking sector, BNM will also extend the timelines for regulatory and supervisory submissions including the results of the stress test for the period up to June 30 as well as regulatory applications affected by the movement control order.

Non-compliance enforcement have also been suspended for the time period.