365-day moratorium for all borrowers bucked

Red flags have been raised over a proposal in the Lower House to oblige banks to grant a 365-day moratorium to all borrowers during this coronavirus (COVID-19) pandemic under the “Bayanihan 2” bill given the detrimental effect of such extended concession to the health of the local banking industry.

“I think a blanket across-the-board [approach] will hurt the industry more than help them. And we have to remember that a key industry in our revival is the banking industry. If that is negatively affected, that will negatively affect our ability to dig ourselves out of this hole,” Finance Secretary Carlos Dominguez said when asked about the matter on Monday in a forum organized by Maybank Kim Eng.

The Bankers Association of the Philippines (BAP) has likewise raised concern on the proposed one-year moratorium, warning that this would put at risk the money entrusted by depositors and constrain the capability of the industry to finance economic recovery.

While the BAP recognizes the need for a grace period during the enhanced community quarantine or even during the modified enhanced community quarantine period, it was alarmed over a proposal to impose a moratorium during any type of quarantine category and to extend such grace period for 365 days.

Dominguez, for his part, said economic managers were still in discussions with the Bangko Sentral ng Pilipinas and the banks on the concessions to be included in the Bayanihan 2.

“I think we should be a little more specific on that. I think we should divide it into consumer loans and other types of loans, rather than just have one type of loans, rather than just have one formula for everybody because, obviously there are companies whose cash flows are still okay and maybe they don’t need those extended period,” Dominguez said during the Maybank Kim Eng forum.

“I think we should be more specific as to the type of borrower than are given some leeway,” he said.

For instance, Dominguez said sugar farmers do not need any loan payment moratorium at this time because it’s harvest season and sales were doing fine.

“However, let’s say there’s a guy who is a gym instructor who has no income for three or four months and he’s got to pay for his motorcycle. I think he should be given a break,” Dominguez said.

“In terms of size of loans, we should be more lenient towards the smaller loans rather than the big corporates who may be able to afford (non-extension),” he said.

Citing his recent conversations with some of the big conglomerates, Dominguez said the property companies were seeing improvement in real estate sales while the food industry had been performing well consistently during the pandemic.

On the other hand, he noted that car companies have taken a hit given the slowdown in vehicle sales.

Overall, Dominguez favors an approach whereby banks negotiate with creditors on a case-to-case basis instead of the whole banking industry being obliged to grant blanket concessions.

During the forum, he also reaffirmed the government’s trust of handling pandemic spending in a “fiscally responsible” way.

“At this point in time, to be very frank about it, there are companies that re going to make it and companies that are not going to make it. We are uncertain which companies are going to survive now and which companies we should help, so I’d much rather do it through the banking system rather than through direct government injections of support,” Dominguez said.

“What we want to do is support consumption, get money back into people’s pockets so that they can spend as 70 percent of our economic growth comes from consumption and consumption has dropped severely,” he said. —Doris Dumlao-Abadilla INQ