‘Everyone is equally responsible to help whether they are a consumer, business owner, bank, regulator, or the local or national government.’
THE national economy and the whole Philippine population have been ravaged by the COVID-19 pandemic and the necessary official response to fight it – the nationwide lockdown. As the local stock market showed, banks and financial institutions have been hardest hit by the economic meltdown.
Since the start of the pandemic, banks have collaborated with stakeholders and policy-makers to adopt regulatory relief measures, to cushion the negative impact of COVID-19 on the economy and their clientele. Banks have also adhered to the Bayanihan to Heal as One Act in order to lessen the burden on borrowers who are unable to pay, from extending payment due dates to waiving fees.
Many banks have eased loan requirements to cope with the new normal and boost economic activities. The banking industry has committed to sustain this throughout the modified enhanced community quarantine (MECQ).
The banking industry came into the COVID-19 pandemic with strong foundations and has been able to support the country with the support of regulatory relief and prudent measures from the Bangko Sentral ng Pilipinas (BSP).
It is just providential that Philippine banks remain resilient with enough buffers, coming from the years of experience during past crises.
Many of us think that banks have infinite resources without realizing that their capital mainly comes from deposits and loans. We’ve heard opinions on how banks should respond to the crisis and how banks are not doing enough. There are requests to write-off portions of loan payments and restructure loans for more than a year. We cannot prevent people from thinking this way since we are facing challenging times.
The business of a bank relies on loans and deposits. Banks have a fiduciary to look after the precious funds of customers to ensure better returns. As a depositor, seeing the possible increase of bad loans is worrisome.
The Bankers Association of the Philippines (BAP) headed by Cesar Consing said a simulation showed a potential increase in non-performing loans (NPLs) and expecting an increase in delinquencies in real and other properties acquired which will result in an increase in the overall non-performing assets.
Banks are also expected to support the recovery and rehabilitation of the Philippine economy. Any more relief measures, compounded with the ones already in place, could result in even more non-performing loans and assets.
Another problem engendered by the lockdown is the increase in cyber fraud as more users shift to online banking/money transfer. Many individuals, especially those who are not used to smartphones, are being tricked into divulging sensitive information such as One-Time-Pin (OTP) and personal information. Also, many might use the pandemic as an opportunity to skip paying for their debts, intentionally and unintentionally, despite having the means to do so. There are those who also ask banks and financial institutions to write-off or condone loan payments despite their having the capacity to pay.
Relief measures might sound good but reprieving payment deadlines are just a band-aid solution in response to the plight of the borrowers and will eventually add burden to both borrowers and lending institutions. Given this situation, banks should carefully look at their borrowers, especially those who are requesting forbearance for more than a year.
The BSP has already implemented several measures to ease the burden on banks as the pandemic continues to spread throughout the country. However, these measures can only hold off for so long until the pressure becomes too much for banks to withstand. Banks are being flexible in dealing with the rising obstacles in remaining strong, but borrowers are taking advantage of the goodwill of the banking industry.
We’ve had a rough GDP in the first quarter of 2020 with -0.2% and the worst is yet to come. However, regulators and industry leaders are putting out all their guns to rehabilitate from the pandemic.
Everyone is equally responsible to help whether they are a consumer, business owner, bank, regulator, or the local or national government. Borrowers should also co-own the responsibility to help in the recovery of our economy.
However, if borrowers insist on extending loan payment due dates, then banks will be hard-pressed to provide funds without putting depositor money at risk.