Finance Secretary Carlos G. Dominguez III warned Friday that the proposed one-year moratorium on loan payments will negatively affect the local banking system and lenders’ ability to provide loans.
“A 365-day [loan payment] moratorium will negatively affect the financials of banks and other credit providers which in turn affect their ability to provide new loans to borrowers or pay interest to their depositors who vastly outnumber their debtors,” Dominguez said.
The proposed 365-day moratorium on loan payments is included in the House of Representative’s version of the Bayanihan to Recover as One (Bayanihan 2) bill, the country’s second coronavirus response law.
Should the provision be enacted into law, Dominguez said “ultimately the entire economy will lose disproportionately more than the gains borrowers will make.”
On Thursday, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the proposed moratorium on loan payments could lead to bank runs and create a credit crunch which would not help an economy.
“While we recognize the noble intentions behind the adoption of a 365-day moratorium on loan payments, the said policy, while having the best interest of the public in mind, may result in unintended consequences that will severely affect the banking industry, the financial system, and the economy,” Diokno warned.