Bank Negara announces measures for financial institutions to assist customers affected by Covid-19

Bank Negara Malaysia (‘BNM’) issued a press release on 25 March 2020 announcing measures to be adopted by licensed banks, licensed investment banks, licensed Islamic banks and prescribed development financial institutions (each as ‘FI’) in Malaysia to assist individuals, small and medium enterprises (‘SME’) and corporations to cushion the impact of the Covid-19 outbreak. A set of FAQs relating to these measures was also issued by BNM on the same day.
A summary of these measures are as set out below.
Moratorium on repayment of/payment of loans/financing
  1. A six months moratorium is automatically granted for loans/financing granted by FIs to individuals and SMEs (excluding credit card balances) from 1 April 2020 subject to the following conditions being fulfilled –
  1. the loan/financing is not in arrears for a period exceeding 90 days as at 1 April 2020; and
  1. the loan/financing is denominated in Ringgit Malaysia.
  1. FIs are required to provide adequate information to these customers on how the suspended repayments/payments are to be treated during the moratorium period and the options for the customers to resume payment after the moratorium period.
  1. Individuals and SMEs that do not wish to avail themselves of the automatic moratorium must be allowed to continue with their existing repayment/payment arrangements with minimal inconvenience.
Credit card balances
  1. FIs are to offer customers the option to convert their credit card (including Islamic credit card) balances into a term loan for a tenure not exceeding three years at an effective interest/profit rate not exceeding 13% per annum. 
  1. Outstanding credit card balances for customers who have been unable to meet their minimum monthly payments for the last three consecutive months are to be automatically converted into term loans.
  1. FIs must comply with the requirements in paragraphs 4 and 5 from 1 April 2020 to 31 December 2020 and have the option to continue with these measures after 31 December 2020 in the interest of customers.
Corporate customers
  1. FIs are strongly encouraged to facilitate requests by corporate customers for a moratorium on loan/financing repayments/payments that will enable viable corporations to preserve jobs and swiftly resume economic activities when conditions stabilise and improve.
  1. Measures may include extending additional financing to support immediate cash flows and the rescheduling of existing facilities to allow a reasonable time for businesses to recover from current disruptions.
Flexibilities to FIs
  1. Various regulatory flexibilities have been afforded to FIs to assist them to implement the above measures. Among others, these include –
  1. excluding the moratorium period from the determination of the period in arrears for regulatory and accounting classifications (e.g. as rescheduled and restructured loans, non-performing loans or credit-impaired loans);
  1. liberalisation of lending/financing restrictions, e.g. the limit on lending to the property sector and for the purchase of shares and unit trusts;
  1. the increase in the counterparty exposure limit to Tenaga Nasional Berhad, Petroliam Nasional Berhad and Telekom Malaysia Berhad from 25% to 35% of an FI’s total capital, subject to the following –
  • the higher limit is only applicable for exposures acquired until 31 December 2021;
  • FIs are required to reduce exposures in excess of 25% by 31 December 2022; and
  • FIs are to ensure that appropriate risk assessments, monitoring and independent review of exposures are undertaken in line with BNM’s policy document on Credit Risk dated 27 September 2019; and
  1. Relaxation/drawdown of certain prudential buffers such as the 2.5% capital conservation buffer; operate below the minimum liquidity cover ratio and reduction of regulatory reserves against expected losses to 0%. After 31 December 2020, FIs will be given until 30 September 2021 to restore these buffers.