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KUALA LUMPUR, November 13 – Bank Negara Malaysia (BNM) today warned against reactivating the freeze on bank loan repayments for all borrowers regardless of whether they need such assistance or can begin to repay, warning that the use of the Debt to boost Malaysia’s economy would not be in the best interests of the country or Malaysians in the long run.
BNM Governor Datuk Nor Shamsiah Mohd Yunus noted that a blanket moratorium on repayment of bank loans “will not be in the best interest of the economy” as it will allow all borrowers, even those who can afford to resume payments, postponing payments would be akin to kicking trouble down the road.
“While it puts more money in people’s pockets in the short term, it creates a lot of economic distortions and has a negative economic impact,” he told the media today in an online briefing, responding to a question about calls from the government and opposition politicians to extend the general loan moratorium.
Malaysia had moved from the general six-month loan moratorium from April to September to the current targeted repayment assistance starting in October, in which banks would only provide such assistance to borrowers who really need help postponing or reducing payments monthly loan installments.
Explaining why it would be detrimental to the Malaysian economy to continue to grant a blanket loan default to all borrowers, Nor Shamsiah said that it would cause banks’ liquidity or cash flow to suffer and discourage them from making new loans that they would be crucial in helping the Malaysian economy recover.
“One, it will limit new loans to homes and businesses as bank reserves deplete and banks become more risk averse,” he said.
He stressed the importance of preserving banks’ capital and liquidity buffers to ensure that banks can continue to lend money to borrowers and support the country’s economic recovery, noting that liquidity could easily disappear, as in past financial crises. .
“While it is true that our banks currently have strong cushions, we have seen how quickly this can change, from our own experience in the 1990s with the Asian financial crisis and elsewhere during the 2008 global financial crisis.
“In this environment and given our limited resources, Malaysia, as is the case in other countries, cannot afford a simultaneous financial and economic crisis,” he said.
Second, Nor Shamsiah noted that household debt to GDP in Malaysia is already at an all-time high of around 90 percent, arguing that an extension of the general loan default would only lead to a general increase in loans. debt levels.
“This will limit growth and hurt the economy going forward as more borrowers struggle under the weight of higher debt. Debt-driven growth is simply not sustainable, ”he said, saying that borrowers who can pay their debts must pay their debts.
In his third reason why it would not be good to extend the general loan moratorium beyond the April to September period, Nor Shamsiah indicated that it would not be in the interests of Malaysia to do so, regardless of whether they deposit their savings. in banks or those who have an interest in banks through money stored in institutional investment funds such as the private sector retirement fund Employee Provident Fund (EPF) or the civil sector pension fund Incorporated Retirement Fund (Kwap) .
“Three, it undermines the interests of millions of depositors who count on banks to keep their money safe, and also the interests of millions of Malaysians who are bank shareholders through their savings with funds like ASB (Amanah Saham Bumiputera), in his EPF retirement savings, Tabung Haji and pensions in KWAP, ”he said.
He noted that public confidence in the banking system and the stability of the Malaysian banking sector must be preserved, adding: “Whatever we do, we must remember that banks safeguard the hard-earned savings of all Malaysians. It is also through their new loans that the banks can support the economy. “
Nor Shamsiah noted that the general loan moratorium was among the one-off measures that were necessary at the start of the Covid-19 pandemic and when the motion control order (MCO) was first implemented in March, but said it would not be. OK to keep using this measure now.
“Despite recent events, the economy is on a recovery path. We are seeing that around 85 percent of borrowers have resumed repaying their loans since we transitioned to targeted repayment assistance. We expect this number to rise even more, as the economy gradually improves.
In other words, many borrowers can and want to pay their debt. This is an encouraging sign for our economy. Reimposing a general moratorium would not be a proportionate or responsible response in these circumstances, ”he argued.
Today, the latest figures from the Department of Statistics of Malaysia (DOSM) show that the Malaysian economy has recovered from the gross domestic product (GDP) growth rate of -17.1 percent in the second quarter of 2020, to an improved rate of -2.7 percent. cent in the third quarter of 2020.
BNM said today that it will keep its projected economic growth rate for 2020 in a range of between -3.5% and -5.5%, while saying that Malaysia is on track to recover with a projected rebound for 2021 with positive growth. rate between 6.5% and 7.5%.
