Singapore regulator, banks in talks to extend debt relief

SINGAPORE • Singapore’s central bank is in talks with lenders about extending the nation’s debt moratorium programme beyond Dec 31 to provide extra relief for borrowers hit by the fallout from the coronavirus pandemic, according to people with knowledge of the matter.

One of the key measures being discussed by the Monetary Authority of Singapore (MAS) and local banks is the possibility of lengthening the debt relief programme, with industries that have been impacted most by the crisis potentially having aid extended by as many as six months, the people said, asking not to be identified because the talks are confidential.

A tiered approach is being considered, so relief is targeted to those needing the most help, one of the people said. Details of the plan and what types of borrowers will be covered under an extension are still being finalised, they said.

An extension to the debt moratorium would help mitigate the so-called “cliff effect” on consumers and businesses once relief measures end. Authorities are using both fiscal and monetary tools to provide support against what may be a record recession that came with the pandemic.

The government introduced additional support measures of S$8 billion (RM24.3 billion) last month, bringing Singapore’s total pledged pandemic aid to more than S$100 billion. They extend to March most wage subsidies that would have expired in August, and are tapered depending on how impacted different sectors are. Deputy Prime Minister Heng Swee Keat has warned, however, that the measures won’t be indefinite as they draw heavily on reserves and risk propping up nonviable businesses.

Under MAS’ current measures announced in March, small and medium-sized firms can opt to postpone principal payments on their secured term loans until the end of the year. Consumers can defer both principal and interest payments on residential mortgages. Individuals suffering a loss of income can ask for a lower interest rate on unsecured credit.

The proposed extension “may not fully mitigate the cliff effect, but it provides more time to banks to restructure their problem loans”, Bloomberg Intelligence analyst Rena Kwok said. Such a move may push the bulk of non-performing loan formation to next year, with credit losses to peak by the end of 2021 and begin returning to normal the following year, she said.

Shares of DBS Group Holdings Ltd rose 1.2% at 4:35pm in Singapore yesterday, paring this year’s decline to 22%. Oversea-Chinese Banking Corp Ltd (OCBC) was trading 0.8% higher and United Overseas Bank Ltd (UOB) was up 1.1%.

MAS MD Ravi Menon in July said the regulator was talking to banks and finance companies about how to ease borrowers into gradually resuming repayments once the debt relief measures expire. “We want to avoid ‘cliff effects’ of a sudden withdrawal of these reliefs,” Menon told reporters during the publication of the MAS annual report.

The central bank has eased monetary policy to help stabilise the economy, and has ensured ample liquidity at financial institutions. It also asked Singaporean banks to prioritise lending by capping their dividend payouts.

While Singapore’s rate of Covid-19 infection is falling and authorities are trying to gradually reopen the economy, many restrictions on businesses and travel remain in place.

Like their global competitors, Singapore’s largest lenders DBS, OCBC and UOB are bracing for a wave of soured debts. — Bloomberg