UPDATE 2-Australian Banks Extend Loan Holidays for Distressed Borrowers
* Banks extend COVID-19 repayment leave by four months
* The regulator allows deferred loans to be displayed as “performing” loans
* ‘Extending and feinging’ in the best interests of banks – UBS (adds UBS comment, extent of repayment moratorium)
SYDNEY, July 8 (Reuters) – Australian banks will extend the loan repayment deferral period to 10 months instead of six for borrowers who are struggling to repay debts due to the coronavirus, the leading banking organization has said.
The Australian Prudential Regulator Authority (APRA) said in a separate statement on Wednesday that banks would be allowed to disregard repayment moratoria as a period of arrears in their capital adequacy and regulatory reporting processes. .
The extension from a previous end date of September reflects concerns that the economic impact of the pandemic will continue when current government income support expires.
“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially,” said the CEO of the Australian Banking Association, Anna Bligh.
APRA said banks will be able to continue showing the roughly A $ 236 billion ($ 164 billion) in loans that have been deferred, or about 10% of all home loans and 15% of business loans, by as “performing” loans for capital and reports. purposes.
While “extend and pretend” may be better for the client and the bank in the short term, “it’s hard to argue that any loan that hasn’t met its scheduled repayments for 10 months hasn’t seen a break. significant increase in credit risk and should be treated as a non-performing loan, ”UBS analysts said.
Australia’s top four lenders, Commonwealth Bank of Australia, Westpac Banking Corp, National Australia Bank and Australia and New Zealand Banking Group, immediately announced options for clients to restructure or postpone their loan repayment plans.
“While many customers are doing better than expected, we know that some customers will need additional assistance and we will be contacting them over the next few months to discuss options that may be available to them,” said the CEO of CBA , Matt Comyn.
Up to half of Australia’s deferred loan borrowers have been able to make repayments, Citigroup analysts said, citing anonymous industry sources. ($ 1 = AU $ 1.4405) (Reporting by Paulina Duran and Byron Kaye in Sydney; and Rashmi Ashok in Bengaluru; Editing by Sam Holmes, Jane Wardell and Himani Sarkar)