Blanket loan moratorium not needed if lockdown

With vaccines delivery on the horizon, analysts view the current targeted assistance on loans will remain in place


ANALYSTS believe it is highly unlikely the government and Bank Negara Malaysia will promote another blanket loan moratorium although talk of a fresh form of lockdown could be instituted across the country this week due to the surge in Covid-19 cases.

With vaccines delivery on the horizon, analysts view the current targeted assistance on loans will remain in place to suit different customers with different needs.

MIDF Research head of research Imran Yassin Mohd Yusof said the government is better prepared in handling the situation compared to when the pandemic first broke in the country, which led to nationwide movement restrictions.

“At the onset of the pandemic and the Movement Control Order (MCO) in March 2020, there were a lot of uncertainties including whether we will be able to get the vaccine.

“Now, however, it is clear we will get the vaccines, therefore, the situation is not as precarious as before. In addition, the government and regulators are more experienced in handling the pandemic than before,” he told The Malaysian Reserve (TMR) recently.

Although banks have the balance sheets to absorb another blanket loan moratorium, Imran Yassin said this move could, however, lead to lower earnings which could cause tightening of credit.

He has a positive outlook on the banking industry’s prospects due to the expected economic recovery.

“We expect provisions will be lower this year, which should help with earnings. Loan growth might accelerate in tandem with the economic recovery,” he added.

The number of positive cases in the country for the past month has not gone below 1,000 and hit a record high last Thursday with 3,027 infected individuals.

This has led to rumours of another possible lockdown in the country, or selected states, to curb the spread of the virus, which will impact the recovery after the slump due to the MCO last March.

According to government officials, the first batch of Pfizer Inc vaccine doses are expected to arrive in Malaysia by February and the quantity will be able to cover 20% of the country’s population.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid shares the same view as Imran Yassin, adding that there cannot be a “one-size fits all” solution when it comes to the loans issue.

“We learnt a good lesson from the loan moratorium last year. There are people who may want to continue to pay their financing commitment and there are also borrowers who are in dire need of assistance.

“It has to be targeted, tailor-made and well-suited for each and every borrower,” he told TMR.

When asked if there will be a downgrade on the industry, he said the central bank has been vigilant in monitoring the institutions’ financial standing based on their active engagement.

He added that banks have their own internal targets, which is usually more than what is prescribed as minimum level whether in capitalisation, liquidity or asset quality.

“In that sense, I think the chances of downgrade would probably be quite remote and perhaps, it is a unique assessment for each country or region,” he said.

Meanwhile, a blanket loan moratorium is also not a necessity as a small segment of borrowers may require some form of assistance.

Another industry expert told TMR that data shows 85% of borrowers resumed repayments after the moratorium ended in September.

“The current targeted approach could be refined perhaps, but should suffice.

“Banks can provide more assistance in a targeted manner for a longer period, perhaps vary repayment terms and give leeway toward certain sectors,” he said.

Senior Minister (Security Cluster) Datuk Seri Ismail Sabri Yaakob said on Saturday the government will not impose a national MCO, but instead will put in place more stringent standard operating procedures in the wake of rising Covid-19 cases in the country.

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