Featured Product

    BNM Extends Moratoria in Response to COVID-19 Crisis

    August 10, 2020

    BNM issued a notice on measures to provide a targeted extension of the moratorium and repayment flexibility to individuals and small and medium-size enterprises (SMEs), which continue to be affected by COVID-19 outbreak. Ahead of the blanket moratorium ending on September 30, 2020, BNM has been working closely with banks to ensure that assistance continues to be provided to the affected borrowers. In addition, the Shariah Advisory Council of BNM, at a special meeting on July 14, 2020, has made a ruling on the practices of restructuring of Islamic financing facility during the COVID-19 crisis. This ruling comes into effect immediately upon publication.

    Targeted extension of moratorium and repayment flexibility

    The banking industry will provide a targeted moratorium extension and provision of repayment flexibility as follows:

    • Individuals who have lost their jobs in 2020 and have yet to find a job will be offered an extension of the loan moratorium for a further three months by their bank.
    • Individuals who are still in employment but whose salaries have been affected due to COVID-19 will be offered a reduction in loan installment in proportion to their salary reduction, depending on the type of financing. Banks will offer the flexibility for a period of at least six months. Banks will also consider extending the flexibility at the end of that period, bearing in mind the salary of the borrower at that time.
    • For hire purchase financing, affected borrowers will be offered revised installment schedules that are consistent with the Hire-Purchase Act 1967.

    In addition, banks have committed to provide repayment flexibility to other individuals and SME borrowers affected by the COVID-19 outbreak. The flexibility offered by each bank will take into account the specific circumstances of borrowers. This includes allowing borrowers to pay only the interest portion of the loan over a period of time; lengthening the overall period of the loan to reduce monthly installments; or providing other forms of flexibility until a borrower is in a more stable position to resume repayments in full. To avail this flexibility, borrowers need to apply directly to their respective banks beginning from August 07, 2020. In recognition of these exceptional circumstances, the flexibility provided to borrowers during this period will not appear in the Central Credit Reference Information System (CCRIS) reports of borrowers. BNM will monitor the progress of banks in assisting borrowers that may continue to face temporary financial difficulties.

    Restructuring of Islamic financing facility 

    Pursuant to section 52 of the Central Bank of Malaysia Act 2009, the Shariah Advisory Council has made a ruling on practices of restructuring of Islamic financing facility during the COVID-19 crisis. 

    • Restructuring of an Islamic financing facility based on original Shariah contracts—This type of restructuring may be undertaken using a supplementary agreement that is cross referred to the terms and conditions of the original agreement. No new agreement is required. This is intended to reduce the cost and challenges to customers and operational burden on Islamic financial institutions. A new agreement is required if the restructuring involves the application of a different Shariah contract; or a combination of multiple financing based on various Shariah contracts into a new single Shariah contract as part of a debt rationalization exercise.
    • Restructuring of an Islamic financing facility into a conventional loan (or vice versa)—Islamic financial institutions are allowed to restructure a conventional loan into an Islamic financing facility. However, restructuring of an Islamic financing into conventional loan is not allowed. In cases where the customer chooses to restructure the existing Islamic financing facility to a conventional loan, it is the customer’s prerogative and choice to do so. In this situation, the customer’s choice is beyond the responsibility and control of the Islamic financial institution.
    • Compounding profit on restructuring—Islamic financial institutions are not allowed to include and account for any accrued profit on an original financing as the new principal amount for the restructured facility. Such practice aims to avoid multiplying of profits charges on debts (compounded profits). Therefore, in implementing a restructuring the new principal amount for the restructured facility is equivalent to the outstanding principal amount of the original facility, provided there is no additional financing. Islamic financial institutions are allowed to charge a new profit rate on the new principal amount. Also, amount of accrued profit and late payment charges (where applicable) on the existing financing can be carried forward and added to the total debt obligation, but this amount cannot be capitalized in the calculation of new profit.

     

    Related Links

    Keywords: Asia Pacific, Malaysia, Banking, COVID-19, Credit Risk, Islamic Financing Facility, Loan Moratorium, Payment Moratorium, Islamic Banking, BNM

    Featured Experts
    Related Articles
    News

    EBA Examines Supervisory Practices, Issues Deposits Reporting Template

    The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),

    May 11, 2022 WebPage Regulatory News
    News

    EC Mandates ESAs to Propose Amendments to SFDR Technical Standards

    The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.

    May 11, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    News

    US Agency Publications Address Basel, Reporting, and CECL Developments

    The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances

    May 09, 2022 WebPage Regulatory News
    News

    SEC Extends Comment Period on Climate Risk Disclosures

    The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.

    May 09, 2022 WebPage Regulatory News
    News

    APRA Reduces Committed Liquidity Facility, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.

    May 09, 2022 WebPage Regulatory News
    News

    EIOPA Responds to Stakeholder Views on Blockchain in Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.

    May 06, 2022 WebPage Regulatory News
    News

    HKMA Announces Decisions on CCyB and Loan Guarantee Scheme

    The Hong Kong Monetary Authority (HKMA) announced that the applicable jurisdictional countercyclical capital buffer (CCyB) ratio for Hong Kong remains unchanged at 1.0%

    May 06, 2022 WebPage Regulatory News
    News

    CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks

    The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.

    May 06, 2022 WebPage Regulatory News
    News

    PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down

    The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.

    May 06, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8168