Blanket Loan Moratorium: No Legal Ability?

  

The latest economic aid package under MCO did not include a blanket loan moratorium. The Finance Minister believes the Government has no legal ability to do so. So, how did he do it the first time around in March 2020 – was that illegal? Government has no control over banks? Only BNM? And BNM is a law to itself?

For a SME, it has to consider rental, staff costs and interest cost. Rental could, hopefully, be re-negotiated with the landlord; staff costs must be reduced including other fixed costs; but loan interest or repayment is not easy to negotiate with banks! A proper case must be made.

For Q1 2021, many banks reported RM1 billion to RM2 billion in net profit (over last three years, eight of Malaysia’s banks made in total RM93 billion in profits). Obscene under the circumstances.

Many SMEs are struggling to survive. And where do banks get their money – depositors or interbank money market! Using depositors’ money (paying them pittance like 1.5% p.a. or thereabouts) they lend cautiously to businesses and charge interest of 5-8% - which is risk related. If banks crash like during the Asian Financial Crisis, taxpayers’ money is used to bail them out. This is not unique to Malaysia – the U.S. did the same in 2008, except for Lehman, the others were bailed-out – including Citibank and Goldman Sachs.

This pandemic and the slow vaccination rate will prolong the pain to May 2022. Meanwhile, SMEs are expected to survive? Over 40% of SMEs still alive will close with the latest MCO. And that is the estimate of the SME Association.

We are in extraordinary times and extraordinary measures are required. Then there is the argument that a blanket loan moratorium will dissuade foreign investors from investing in Malaysia. Do you believe this? Foreign investors are going to Singapore, Indonesia or Vietnam. And the MITI Minister says we are selective to who comes here! Really? We don’t need Amazon, Facebook, Google or Hyundai? They don’t qualify under our high standards? Douglas Lim should do a parody on this!

 

Source:www.nst.com.my

The purview of the Minister of Finance includes BNM. Using moral suasion, BNM can propose a blanket moratorium which all banks will invariably follow. So, what is your problem, Minister?

 

Reference:

Blanket moratorium – Zafrul explains no legal ability to force banks, Kow Gah Chie, Malaysiakini, 1 June 2021