BNM: Loan 'restructuring and rescheduling' upon repayment moratorium expiry

KUALA LUMPUR (July 24): Bank Negara Malaysia (BNM) has told analysts that upon expiry of the loan repayment moratorium by end-September 2020, banks in the country will not extend the scheme but will continue to offer targeted financial assistance in the form of restructuring and rescheduling (R&R) to borrowers who continue to face repayment issues.

Analysts, who participated in the virtual meeting with BNM yesterday, wrote in their notes today that BNM said loans subject to R&R schemes would not be classified as impaired for genuine cases where borrowers faced temporary restraints on their cashflows.

"Nonetheless, MFRS 9 (Malaysian Financial Reporting Standard 9) will remain applicable whereby loans will be subject to the staging process (stages 2 and 3)," Affin Hwang Investment Bank Bhd analyst Tan Ei Leen said.

"Hence, in our view, banks' expected credit losses will remain elevated in 2020-21 and will be driven by economic conditions in the country. At this juncture, we continue to be wary of further rise in business foreclosures, especially for higher-risk sectors such as the tourism-related, wholesale and retail, airlines-related, construction, real-estate and manufacturing [sectors]," Tan said.

MIDF Amanah Investment Bank Bhd analyst Imran Yassin Yusof said today key takeaways from the BNM meeting included the central bank's assertion that banks in the country were resilient as they faced the current Covid-19 pandemic-driven crisis from a position of strength.

"Expecting NPLs (non-performing loans) and credit cost to spike post moratorium; impairments to peak in CY21 (calendar year 2021).

"BNM believes that the household segment will be stable. While the household debt remains elevated, overall debt-servicing capacity of households continues to be supported by income growth and adequate financial buffers," Imran said.

BNM in March 2020 announced the six-month loan-repayment moratorium starting April 1, 2020 to help individuals and businesses affected by the Covid-19 pandemic, which led to the Malaysian government implementing the Movement Control Order (MCO) to curb the outbreak.

Malaysia's MCO, initially scheduled between March 18 and 31, 2020, had for a start, required non-essential businesses to stop operations, while the public was ordered to stay at home to curb the Covid-19 outbreak.

On March 25, Prime Minister Tan Sri Muhyiddin Yassin said the government decided to extend the MCO until April 14, because updates from the National Security Council and the Health Ministry indicated an increase in Covid-19 cases.

On April 10, Muhyiddin said the government was extending the MCO until April 28.

On April 23, Muhyiddin said the MCO would be extended for another two weeks until May 12.

On May 4, news reports, quoting Senior Minister (Security Cluster) Datuk Seri Ismail Sabri Yaakob, indicated that regulations under the phase four of the MCO were null and void with the commencement of the Conditional Movement Cotrol Order (CMCO) or phase five of the MCO.

On May 10, Muhyiddin said the CMCO would be extended to June 9.

On June 7, Muhyiddin said the CMCO would be replaced by the Recovery Movement Control Order beginning June 10 until Aug 31.

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