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Banks expand loan relief policies

by Charbel Kadib6 minute read

The banks have agreed to extend their loan relief policies to encapsulate a larger portion of borrowers affected by the coronavirus pandemic.

The Australian Banking Association (ABA) has announced that its members have agreed to extend the six-month deferral of loans to an additional 30,000 businesses impacted by the economic fallout from the coronavirus (COVID-19) outbreak.

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The new policy – which builds on the ABA’s Small Business Relief Package – expands eligibility criteria for access to repayment holidays to businesses with loan facilities of up to $10 million, up from $3 million.

According to the ABA, the updated policy would apply to approximately 98 per cent of all businesses with loans secured from an Australian bank and would encompass a further $100 billion in business loans ($250 million in total).

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The banking association said businesses with total loans of more than $10 million may also be eligible for the relief but would be assessed “on a case-by-case basis”.

Banks have also agreed not to enforce business loans for non-financial breaches of the loan contract, like changes to valuations.

The ABA noted that the new measures will apply across all sectors of the economy, and on an opt-in basis, under the conditions that:  

  • for commercial property landlords – they provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears as a result of COVID19
  • the customer has advised that its business is affected by COVID-19
  • the customer was current in terms of existing facilities 90 days prior to applying
  • interest is capitalised – meaning either the term of the loan is extended, or payments are increased after the deferral period.

The announcement of the revised policy follows the federal government’s decision to introduce an eviction moratorium and provide rent relief for commercial tenants.

ABA CEO Anna Bligh commented: “As this crisis has deepened and more businesses are affected, we are building on the Small Business Relief package to ensure more businesses are given a lifeline to help them survive through the coronavirus pandemic.”

She added: “The type of businesses this applies to includes commercial landlords of properties such as local shopping centres, pubs, clubs and restaurants, who must agree not to terminate leases or evict current tenants for rent arrears due to COVID-19 in order to access support.  

“This will help protect many more thousands of small businesses from being evicted if they are struggling to pay the rent as it covers approximately 90 per cent of commercial property owners who have loans with an Australian bank.”   

Ms Bligh concluded: “Where landlords within this threshold do the right thing by their tenants, banks will do the right thing by them.”

The updated policy was developed in conjunction with the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).

The Australian Competition and Consumer Commission (ACCC) has provided interim authorisation for the ABA's revised policy, which is conditional on banks providing details of any programs and arrangements to the ACCC before implementation, and seeking ACCC approval in some circumstances.

The new measures have been welcomed by lenders, including the big four banks. who have also announced new unsecured loan offerings to support businesses with cash flow constraints.  

ANZ’s managing director, commercial banking, Isaac Rankin commented: “While ANZ’s original COVID-19 relief package already covered these larger businesses, we welcome this industry-wide initiative and hope it provides vital relief for these businesses and the Australians they employ in these challenging times. It will also provide a reprieve for the vast majority of commercial tenants.”

Commonwealth Bank CEO Matt Comyn added “We welcome the supplementary business relief package from the Australian Banking Association and the additional benefits it brings for our customers.

“By extending our support, we’ll help more businesses stay afloat, and that means more people will keep their jobs.”

NAB CEO Ross McEwan added that approximately 98 per cent of the bank’s business customers will now be eligible for loan relief. 

“[These] new measures will be critical for commercial property customers struggling to meet their own commitments as a result of tenants experiencing difficulty.

“We will now move to implement these measures as quickly as possible.”

Westpac chief executive, business Guil Lima said: “This is about offering immediate and practical assistance to help more of our customers in need.”

[Related: Government to put businesses in ‘hibernation’]

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Charbel Kadib

Charbel Kadib

AUTHOR

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

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