Singaporean banks extend debt relief for distressed borrowers
SINGAPORE: Singaporean banks will extend debt relief for individuals and small and medium-sized businesses beyond the end of the year to support borrowers hardest hit by the coronavirus pandemic.
The measures, which are due to expire on December 31, will now gradually end during 2021, the Monetary Authority of Singapore (MAS) said in a statement. The expanded program will be phased in so that companies most in need – such as aviation and tourism – can defer 80% of their principal repayments until June 30, the regulator said.
People with home loans who are unable to resume full repayment due to loss of income can request reduced payments set at 60% of their monthly payment for nine months. Borrowers who find it difficult to pay off unsecured revolving credit facilities can request repayments at a lower rate, MAS said.
The Singapore government, like many around the world, is trying to navigate what is expected to be a record-breaking pandemic-triggered recession. Authorities are taking action to mitigate the so-called “cliff edge” on consumers and businesses once the relief measures are over. The city-state has pledged virus aid of around S $ 100 billion (US $ 73 billion).
“We want to continue to provide relief to borrowers facing cash flow problems while encouraging them to resume their loan repayments as far as they can, so that they do not accumulate too much debt,” the director said. MAS general Ravi Menon in the press release.
Bloomberg reported last week that the regulator and the banks were in talks for a possible extension.
As of August, more than S $ 11.5 billion in SME loans and about S $ 29 billion in home loans had been deferred, according to MAS. This represents about 6% of the S $ 677.9 billion in outstanding loans from Singaporean banks.
Like their global peers, local lenders DBS Group Holdings Ltd, Oversea-Chinese Banking Corp and United Overseas Bank Ltd are bracing for a wave of sour lending. Collectively, they allocated S $ 4 billion in provisions in the first half of the year.
Diksha Gera, analyst at Bloomberg Intelligence, extending debt relief measures could delay banks’ recognition of stress until 2021 and 2022, hampering their ability to assess the impact of the virus on quality actives.
“Banks could increase prudential provisions this year to cushion the impact of bad debts once support wears off,” Gera said. – Bloomberg