BNM announced a number of regulatory and supervisory measures to support banking institutions to assist individuals, small and medium-size enterprises (SMEs), and corporations to manage the impact of COVID-19 outbreak. These measures relate to deferment and restructuring of loans or financing facilities, liquidity conditions, capital and liquidity buffers, and extension of consultation periods. BNM also published a set of frequently asked questions (FAQs) to address public queries regarding the Loan or Financing Deferment Measure.
Deferment and Restructuring of Loans or Financing Facilities
To ease the cash flow of individuals and SMEs that are likely to be the most affected by COVID-19 outbreak, banking institutions will offer to defer all loan or financing repayments for six months, with effect from April 01, 2020. Individuals and SMEs that do not wish or need to avail of these facilities can continue with the current repayment structures. Banking institutions will also facilitate requests by corporations to defer or restructure their loans or financing repayments.
Ample Liquidity Conditions
During this period, the financial intermediation activity can be supported by sufficient liquidity in the banking system. BNM will continue to supply daily ringgit liquidity to banks via various tools under its open market operations, including the outright purchase of government securities, FX swaps, reverse repos, and the standing facility. BNM also took preemptive measures to boost liquidity through the recent reduction in Statutory Reserve Requirement (SRR) ratio by 100 basis points.
Additional Supervisory and Prudential Measures
BNM reviewed its planned regulatory and supervisory activities in 2020 to ease compliance and operational burdens on banking institutions.
- Banking institutions may draw-down on the capital conservation buffer of 2.5%, operate below the minimum liquidity coverage ratio of 100%, and utilize the regulatory reserves that were set aside during periods of strong loan growth. BNM fully expects banking institutions to restore their buffers within a reasonable period after December 31, 2020.
- The implementation of the net stable funding ratio will proceed as scheduled on July 01, 2020. However, the minimum net stable funding ratio will be lowered to 80% for now, although banking institutions will be required to comply with the requirement of 100% from September 30, 2021.
- BNM will extend the timeline for all ongoing consultations on discussion papers and exposure drafts to June 30, 2020 and beyond.
- Flexibility will also be provided to banking institutions to meet timelines for regulatory submissions.
Enhancements to Financing Facilities to Assist Affected SMEs
BNM is enhancing the existing financing facilities under the BNM Fund for SMEs in the form of:
- An increase in the allocation of the Special Relief Facility to provide relief assistance to more SMEs who are affected by the COVID-19 outbreak. The maximum financing rate is now lowered from 3.75% per annum to 3.50% per annum. The enhanced Special Relief Facility is available until December 31, 2020.
- An increase in the allocation of the All Economic Sectors Facility to enhance access to financing for SMEs and to support growth, with the maximum financing rate being reduced from 8% per annum to 7% per annum.
- Other facilities to SMEs, namely the Automation and Digitalization Facility and Micro Enterprises Facility.
Program to Support the B40 Segment in Generating Sustainable Income and Achieve Financial Resilience
To further facilitate access to funding and help build entrepreneurship capability among B40 micro-entrepreneurs, a social finance program will be introduced by participating Islamic banks in collaboration with some State Islamic Religious Councils and implementation partners. The program is designed to mobilize social finance contributions toward providing seed capital that is packaged with micro-financing for eligible micro-entrepreneurs to start and grow business to generate sustainable income.
Keywords: Asia Pacific, Malaysia, Banking, COVID-19, SME, Capital Buffers, Liquidity Buffer, NSFR, FAQ, Islamic Banking, BNM
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