FINANCIAL institutions in Singapore are to walk single file on how certain relief measures should be structured to allow distressed property owners and small- and medium-sized enterprises (SMEs) a pause on debt repayments or payments on insurance if hit with a sharp loss of income.
As the virus outbreak fans out across the globe and is expected to contract Singapore's open economy this year, the Monetary Authority of Singapore (MAS) and other industry bodies on Tuesday outlined, among other things, that banks and finance companies must allow deferments through to the end of the year of principal repayments of qualifying mortgages and secured corporate loans.
This comes as each financial institution here has come up with its own relief assistance in quick succession.
From April 6, MAS said qualifying SMEs seeking to pause on their principal payments on their secured term loans can do so, and have a deferment last till Dec 31, 2020. Data from the MAS on Tuesday showed that more than S$40 billion of secured borrowings held by SMEs should qualify for such a deferment.
MAS said banks and finance companies will assess the value of the collateral backing the loan on their own credit assessment terms, but they must take the value of the collateral as assessed at the point of application of the relief, and not cut the amount of relief offered against the security if the collateral falls in market value during the deferment period.
Besides deferring secured term loans, banks and finance companies are also expected to work with SME customers to adjust repayment schedules for other types of loan facilities.
If they wanted to, SMEs can ask as well to extend the tenure of their loans by up to the corresponding principal deferment period. This relief will be available to SMEs that still pay interest and that have not more than 90 days past due as at April 6, 2020.
Banks and finance companies may later channel to their SME customers the low-cost funding granted through a new MAS Singdollar Facility, too. These are for loans granted under Enterprise Singapore's SME Working Capital Loan scheme and Temporary Bridging Loan Programme.
Once the scheme is open for application, financiers can apply for this scheme from then to end-December if they pass on savings in funding cost - in the form of a lower interest rate - to eligible SME borrowers.
Kurt Wee, president of Association of Small and Medium Enterprises (ASME), said the latest moratorium on principal repayment of loans will keep liquidity in the system.
"Businesses are facing a lot of cash calls without the corresponding revenues - this will be very appreciated by businesses as it helps with their cashflow," he told BT, adding that demand for this will go up in the next few months, as businesses can now structure financing plans for the next six months.
From April 6, distressed property owners can ask as well to defer both principal and interest payments, or just the principal payments, up till Dec 31.
MAS said that interest will accrue only on the deferred principal amount. This means that no interest will be charged on the deferred interest payments on mortgages. Lenders will also approve the request for deferment as long as the individual is not in arrears for more than 90 days as at April 6. Individuals do not need to show any impact from Covid-19 to secure the deferment.
For consumers who have lost at least 25 per cent of their monthly income after Feb 1, and are at risk of incurring substantial arrears, they can also seek to convert their outstanding balances to term loans at a reduced rate of interest, capped at 8 per cent, as compared with the 26 per cent typically charged on credit cards.
The term of the converted loan can be up to five years, depending on the individual's ability to meet the minimum monthly repayment.
In the area of insurance, individuals with life and health insurance policies can from today opt to defer premium payments for up to six months while maintaining insurance coverage during this period. This is for all individual life and health insurance policies with a policy renewal or premium due date beginning today, and ending Sept 30, 2020.
As for general insurance, both individuals and corporates can seek out instalment payment plans while retaining insurance protection. Such insurance plans include insurance for property and vehicles.
To be clear, to take a pause on debt obligations means that customers will have to foot the bill later, and the deferment can lift the total debt burden. This is similarly so for insurance policyholders who choose to defer their policy instalment payments.
"Deferring payments increases future obligations and hence borrowers and policyholders should weigh their options carefully," MAS said in its media statement, which also represented the Association of Banks in Singapore, the Life Insurance Association, the General Insurance Association, and the Finance Houses Association of Singapore.
Singapore has also not gone down the route of an automatic moratorium, as is done in markets such as Malaysia, where customers are automatically granted a repayment holiday. MAS said customers in Singapore will need to opt-in to see if they qualify, as cashflow circumstances for each customer differs. But financial institutions should process all applications "expeditiously", it said.
The Singapore banks had set out their own relief packages earlier, with just one common criterion: these would go to creditworthy customers that will have a fighting chance in surviving the virus outbreak. Other international banks, including Citigroup, HSBC and Standard Chartered, have also announced measures.
UOB got the ball rolling with a S$3 billion relief package for Singapore-based companies, especially SMEs. Its relief included allowing affected businesses to rework their principal repayments and to service only their loan interest for up to one year.
OCBC followed up a day after with an offer of targeted support to customers across its core markets, including Singapore, Malaysia and Hong Kong. Its offer included a six-month principal moratorium for business loans, collateral-free temporary bridging loan of up to S$1 million with flexible repayment period, and working capital financing of up to S$600,000 at "attractive" rates.
DBS, like OCBC, did not put a final number on the estimated size of its relief assistance. Among other things, DBS offered a six-month principal repayment moratorium for SME property loans, and an extension of import facilities of up to 60 days.
Banks also had their own terms for deferring mortgage repayments.
Singapore banks said they were supportive of the latest measures. In a statement, Wee Ee Cheong, CEO of UOB, said the bank looks to "see our customers through to better times".
Linus Goh, head of global commercial banking, OCBC Bank, said feedback from more than 6,500 of its SME customers showed nearly a third of them are keen to receive assistance during this difficult period. "We believe SMEs will respond positively to this announcement on relief measures to be offered by the banks."
Country head of DBS Singapore Shee Tse Koon said the bank will make available a number of enhanced relief packages by early next week. - Additional reporting by Vivien Shiao