Featured Product

    SARB Publishes Update on COVID-19 Loan Guarantee Scheme

    July 26, 2020

    SARB updated its COVID-19 loan guarantee scheme, along with the associated frequently asked questions (FAQs). The COVID-19 loan guarantee scheme is an initiative to provide loans, substantially guaranteed by government, to businesses to meet some of their operational expenses. Commercial banks and the National Treasury share the risks of these loans, which is administered by SARB. One of the key changes to the scheme is a relaxed test for good standing, which has now moved back to December 31, 2019, from February 29, 2020, to accommodate firms that were already experiencing cash-flow problems in February.

    The loans are granted at a preferential rate (prime) and repayment may be deferred for a maximum of one year after taking out the loan. Businesses will then be required to repay the loan over five years. Government and commercial banks are sharing the risk of non-repayment of these loans. Government is engaging with non-bank lenders to possibly extend the scheme. Following a review of the scheme, the following changes are announced:

    • Business restart loans will now be available, to assist businesses that are able to begin operating as the economy opens up.
    • Bank credit assessments and loan approvals will be more discretionary and less restrictive, in line with the objectives of the scheme. Banks may use their discretion on financial information required—for example, bank or financial statements, where audited statements are not available. Suretyships or guarantees may also be required. The provisions of the National Credit Act and Financial Intelligence Center Act remain applicable
    • Clients can now access the loan over a longer period. The draw down period has been extended from three months to a maximum of six months. For example, a ZAR 6 million loan can be drawn down over six months, at ZAR 1 million a month if the business qualifies. 
    • The interest and capital repayment holiday has been extended from three months to a maximum of six months after the final draw down. For example, in the case of the same ZAR 6 million loan, drawn down at ZAR 1 million a month for six months, with repayments only being required from month 13.
    • The turnover cap has been replaced with a maximum loan amount of ZAR 100 million. Banks may also provide syndicated loans for loans larger than ZAR 50 million.
    • Sole proprietorships are now explicitly included. For sole proprietorships and small companies, salary-like payments to the owners are included in the use of proceeds. Security, suretyships, or guarantees are not explicitly required,

    The National Treasury, SARB and commercial banks, represented by The Banking Association South Africa, have agreed on the relevant legal framework and financial and operational requirements. SARB will provide the finances for these loans to banks and will keep a record of the amounts owing by each bank as well as the default rates. SARB will publish an annual report setting out how much each bank has used from the scheme and the performance (default rate) of each bank’s COVID-19 loan portfolio. All commercial banks can access the guarantee scheme, though SARB reserves the right to limit the amount that can be accessed by an individual bank. Participating banks at the moment include Absa, Bidvest Bank, First National Bank (FirstRand), Grindrod Bank, Investec, Mercantile Bank, Nedbank, SASFIN Bank, and Standard Bank.


    Related Link: Press Release and FAQs

    Keywords: Middle East and Africa, South Africa, Banking, COVID-19, Credit Risk, Loan Guarantee, FAQ, Payment Deferrals, SARB

    Related Articles
    News

    US Regulators Release Stress Test Scenarios for Banks

    The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).

    February 28, 2024 WebPage Regulatory News
    News

    Asian Governments Aim for Interoperability in AI Governance Frameworks

    The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.

    February 28, 2024 WebPage Regulatory News
    News

    EBA Proposes Operational Risk Standards Under Final Basel III Package

    The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.

    February 26, 2024 WebPage Regulatory News
    News

    EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS

    The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.

    February 23, 2024 WebPage Regulatory News
    News

    ECB to Expand Climate Change Work in 2024-2025

    Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.

    February 23, 2024 WebPage Regulatory News
    News

    BIS Bulletin Examines Cognitive Limits of Large Language Models

    The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.

    January 25, 2024 WebPage Regulatory News
    News

    ECB is Conducting First Cyber Risk Stress Test for Banks

    As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.

    January 24, 2024 WebPage Regulatory News
    News

    EBA Continues Momentum Toward Strengthening Prudential Rules for Banks

    A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.

    January 24, 2024 WebPage Regulatory News
    News

    EU and UK Agencies Issue Updates on Final Basel III Rules

    The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards

    December 19, 2023 WebPage Regulatory News
    News

    Industry Agency Expects Considerable Uptake for Swiss Climate Scores

    The Swiss Federal Council recently decided to further develop the Swiss Climate Scores, which it had first launched in June 2022.

    December 18, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8952