Banks can afford loan moratorium extension, says Lim

pic by RAZAK GHAZALI

OPPOSITION lawmakers urged the government to extend the loan moratorium by at least another six months as banks have enough capital buffers to bear the additional cost of RM6.4 billion.

Former Finance Minister Lim Guan Eng (picture) said the banking industry earned an estimated RM32 billion in after-tax profits for the whole of 2019 and it should provide sufficient cover for banks to bear the RM6.4 billion cost.

“The plea to the Perikatan Nasional administration to extend the existing moratorium on bank loans by another six months when it expires on Sept 30, 2020, has gained further ground when it was revealed that banks would lose a total of RM6.4 billion due to the six-month moratorium.

“This is a small price to pay for the banking industry when 93% or 7.7 million individual borrowers and over 245,000 small and medium enterprises (SMEs) or 95%, have benefitted from the six-month moratorium which was implemented on April 1,” he said in a statement yesterday.

On Monday, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said the country’s banking system is estimated to lose RM1.06 billion under the Malaysian Financial Reporting Standards 9 for every month the moratorium is extended.

The Bagan MP reckons that the government can bear the cost of RM6.4 billion to aid the 7.7 million individual borrowers and 245,000 SMEs, if the banks are unwilling to cough up the amount.

“The RM6.4 billion cost is small compared to the tens of billions of ringgit in additional loans over and above the Budget 2020 loan provisions to finance the Covid-19 economic stimulus package.

“Failure to do so would only increase the suspicion that the RM295 billion stimulus package is only heard but not felt, benefitting certain well-connected groups but not ordinary Malaysians and SMEs,” Lim added.

Lim urged Prime Minister Tan Sri Muhyiddin Yassin to immediately announce the extension of the moratorium of bank loans by another six months.

“This is to assure ordinary Malaysians and reassure SMEs and businesses that they are not forgotten or alone in facing the current economic crisis,” he added.

Separately, Johor Baru MP Akmal Nasir questioned Tengku Zafrul’s calculations on the banking sector’s estimated losses of RM1.06 billion per month due to the moratorium.

Akmal pointed out that the borrowers would eventually have to pay off their loans.

“That being said, a moratorium should not result in losses for the banks. The interest and the principal would still need to be paid,” he told reporters during a press conference in Parliament.

“Was the minister referring to postponed earnings? This does not compare to the small business owners who are footing the costs of providing their products or services.

“The banks’ loans won’t be going anywhere. The borrowers still need to pay,” he said, adding that the third economic stimulus package also offered a special tax incentive for banks.

He highlighted that banks will only recognise losses when loans turn into non-performing loans (NPLs).

He pointed out that NPLs prior to the moratorium stood at 1.57%, which he deemed as low.

“An extension of the moratorium will allow individuals and small businesses to financially recover. If the moratorium is stopped before the economy stabilises, NPLs will rise which will translate to losses for the bank,” he said.