Targeted moratorium the way to ensure resumption of financial responsibilities

Banking sector suffering RM1b in losses per month due to moratorium, says Tengku Zafrul

by HARIZAH KAMEL/ pic by RAZAK GHAZALI

ANY extension of the loan moratorium should be targeted to ensure there will be an orderly resumption of financial responsibilities for individual borrowers and companies that can afford to pay their loans, economists said.

An economist told The Malaysian Reserve (TMR) individuals whose finances are not badly affected should resume payments, instead of being lulled into a false sense of security and spend their money on other things instead of their monthly commitments.

“It is not so much about the losses that banks may incur, but more toward the resumption of financial responsibilities.

Yes, conditions are challenging, but borrowers are likely being lulled into a false sense of security and spending money which would otherwise have been towards repayment of their loans,” the expert who requested anonymity said.

He said there will be no end to the payment holiday if banks are made to go down this route.

“The six months is a good measure. It buys time and it allows people to manage finances better in the face of current challenges, but extending it further could pose different ‘problems’ at a later date.

“The assistance (extension) should be given to those who are really in need.”

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in the Dewan Rakyat yesterday that the banking sector is suffering RM1.06 billion in losses per month due to the moratorium.

Tengku Zafrul said the sector would suffer a total loss of RM6.4 billion by the time the six-month moratorium period ends, equivalent to the reduced capacity for banks to provide new loans to borrowers.

“Based on our discussion with the banks, they have expressed their commitment to continue helping the public and an announcement will be made soon regarding the moratorium,” the minister said.

He was answering a supplementary question from former Finance Minister Lim Guan Eng (Pakatan Harapan-Bagan) who asked about the implications borne by the banking sector following the implementation of the moratorium.

Several quarters such as the Malaysian Employers Federation (MEF) and Malaysian Trades Union Congress (MTUC), as well as some political leaders, have called on the government to extend the loan repayment moratorium for another six months come October.

As of June 19, the estimated value of the moratorium was RM43.7 billion, of which RM15.3 billion was utilised by the business sector, while RM28.4 billion was utilised by the people via financing qualified for the moratorium.

AmBank Group chief economist and head of research Dr Anthony Dass said when the moratorium period ends in September, any extension should be more targeted than a blanket one.

“Loan restructuring or rescheduling should be given to those affected by the virus pandemic. There could be some who may seek partial relief.

“Another round of blanket moratorium will potentially create a ‘subsidy’ mentality and could support some of the ‘zombie’ companies from going under. Should we support these kinds of companies?” he told TMR yesterday.

Dass said the scenario will create an impression that the government will do everything possible to prevent defaults.

“It risks jolting the stock market by helping keep unviable businesses afloat just to ensure the unemployment rate does not spike.”

Malaysian Industrial Development Finance Bhd group MD Datuk Charon Wardini Mokhzani last month told TMR the extension of the moratorium should not be given in full as many businesses are already on the path to recovery and would have the means to service their loans.

“I’m not sure if we should give another blanket approval. If there are certain businesses which require help or certain sectors which require assistance, I think we should target them. A blanket approval for another six months seems to be too much.”