Banks ready to extend loan payment grace period if lockdown gets lengthened
MANILA, Philippines — Banks are open to extending anew the 30-day grace period for payment of loans offered initially to customers affected by the Luzon-wide community quarantine, but which the government said should be applicable to borrowers nationwide.
“The banking industry and individual banks…will follow the law and its implementing rules in order to achieve its objectives,” the Bankers Association of the Philippines (BAP), which groups the country’s biggest banks, said in an e-mailed statement.
“We remain resilient during this disruptive time for our country and economy,” BAP added.
Medium-sized savings banks also stand ready to extend more relief to customers. “Kindly note that what the law/IRR provides for is only an extension of loan payment and not a condonation,’ Suzanne Felix, executive director of Chamber of Thrift Banks (CTB), said in a text message.
While lenders already took the initiative to extend loan payment period by 30 days since the enhanced community quarantine (ECQ) started March 16, the implementing rules and regulations of Republic Act 11469 or Bayanihan Act mandates an “automatic” extension “if the ECQ period is extended by the President.”
The island quarantine, which ends April 12, was meant as a drastic response to stem the spread of coronavirus disease-2019, which has infected 2,311 as of Wednesday afternoon.
Banks’ grace period on loan payments effectively waives penalty, interest and other surcharges typically imposed on delinquent payments. It was made available mostly to clients in Luzon, where the quarantine is in effect, but Finance Secretary Carlos Dominguez III indicated all borrowers should be able to benefit.
“Neither the law nor IRR limits the coverage to Luzon,” said Dominguez, who signed the law’s IRR.
That said, lenders of different sizes are one in saying that banks’ balance sheets are healthy enough to take an extended deferral of loan payments, which form part of their liquidity sources.
“We remain resilient during this disruptive time for our country and economy,” BAP said.
As of end-2019, banks’ capital adequacy ratio— a measure of financial strength— stood at 16.04% on a consolidated basis including subsidiaries, way above the BSP’s minimum required of 10%.
Thrift banks are likewise adequately capitalized at 17.46% CAR as of end of last year, data showed. Our liquidity ratios remain healthy and beyond the minimum required,” Felix said in an email.
“CTB member-banks can weather this,” she added.
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