Pain Now Profit Later With Longer Moratorium Says Analyst

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A longer moratorium on loan repayments would reap benefits for banks in the long run, says an economist. (Bernama pic)PETALING JAYA: An economist has stated his support for an extension to the six-month moratorium on bank loans, calling on banking institutions to see “the bigger picture” although they might suffer for a while
Carmelo Ferlito, senior fellow of the Institute for Democracy and Economic Affairs, said helping businesses and households under financial stress to get back on track would pay off in the long run
The extension of the moratorium might be the best way to prevent customers from defaulting on loans, as banks would lose their credit rating if customers default
“A moratorium extension could be the best way for the banks to ensure future cash flow; a delay is better than a deletion. In the short run, the extension may create troubles for banks, sure. But it could be the way to grant that profitability comes back in the near future,” he told FMT
Bank Negara Malaysia recently indicated that it had no intention to extend the moratorium, pointing out that it has cost financial institutions some RM47.5 billion since coming into effect on April 1
Of the sum, RM16.6 billion had benefited the business sector, while the remaining RM30.9 billion was for the public
Finance Minister Tengku Zafrul Aziz has said Putrajaya was engaging with banks to extend the six-month moratorium on bank loans
Carmelo FerlitoFerlito said the extension should be discussed with BNM so that banks may receive some support from the central bank even as customers are aided by the institutions
He said unconventional answers were needed in view of the exceptional circumstances of the coronavirus lockdown
An extension to the loan moratorium would create less distortions on Malaysia’s economic structure, he said
Banks should have discretion over a targeted extension as a central policy may be difficult to implement and fail to target the right people
“Banks know their customers better. In choosing who could benefit from the extension, I would support customers who are financially weak now but who were supported by good fundamentals before the MCO took place,” he said
The Malaysian Trades Union Congress had also joined the chorus of calls for the moratorium to be extended for at least another six months
MTUC secretary-general J Solomon said many were unable to service their loans, such as the 800,000 workers who have lost their jobs since April and thousands more forced to take pay cuts or go on unpaid leave
Solomon urged the authorities to stop making excuses for the banks, which had been making huge profits in the past, and to side with the workers. - FMT

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