The Bangko Sentral ng Pilipinas (BSP) said over the weekend that despite the no mandatory loan moratorium during the two-week hard lockdown, financial consumers and clients may still avail or seek relief measures from their respective banks.

The two Bayanihan laws, which provided huge economic stimulus packages and grace periods to banks borrowers, had already lapsed.  The third version of the Bayanihan law is still being deliberated but it has no provision for grace periods or loan moratorium.

The BSP issued an advisory on Saturday (August 7) for bank customers with loan payments to approach their banks if they will have problems meeting their due dates due to the reimposition of enhanced community quarantine (ECQ) last Friday, August 6 until August 20.

“Bank clients may continue to approach their banks for financial relief even if the BSP will not issue a mandatory moratorium or grace period for loans during the ECQ,” said the BSP.

It said it has “urged” all BSP-supervised financial institutions (BSFIs) to “renew, restructure, or extend the terms of the loans of their clients in consideration of their cash flows.”

“Banks and their clients may agree on loan terms that fit the bank’s financial capability and the client’s financing requirements,” said the BSP.

The BSP has granted plenty of prudential relief measures to BSFIs to ensure uninterrupted financial services during the COVID-19 lockdowns. It has kept the interest rate at a low of two percent since November 2020, and provided liquidity to banks by reducing the required reserves ratio with the BSP to encourage lending to households and businesses especially micro, small and medium enterprises.

However, despite relief measures to banks, the credit activity remains weak, and COVID-19 cases continue to rise with the Delta variant, affecting market and investor sentiments. Bank lending has contracted for the past seven months.

BSP Governor Benjamin E. Diokno said they will continue to extend relief measures to “boost market confidence and free up funds for lending to businesses and households.”

“We (have) implemented various time-bound regulatory relief measures to enable banks and their clients to manage the impact of the pandemic on their finances. These measures range from grace periods for loan payments to capping of interest rates on credit card usage, among others,” said Diokno.

This is the second ECQ lockdown this year with no grace period or loan moratorium for bank clients.

The last ECQ imposed was in March this year which was originally just seven days but lasted five weeks until mid-May. The latest ECQ status is the third since March 2020, and technically the fourth imposition, counting the Moderate ECQ which lasted two weeks in August of last year.  

The Inter-Agency Task Force (IATF) also has no authority to extend grace periods nor did they indicate that there will be an extension of any grace period while on ECQ. The IATF’s Omnibus Guidelines with amendments as of March 28 for the management of emerging infectious diseases “does not operate to extend the 30-day grace period provided for under RA (Republic Act) No. 11469,” the BSP clarified earlier.

Diokno has said that the banking system may find it harder to absorb another round of grace periods or debt payments as they need time to build up buffers. 

In May, banks’ non-performing loan (NPL) ratio was a 13-year high of 4.49 percent. The last time gross NPL ratio was at this level was in June 2008 before it rose to 4.52 percent in September 2008, in the middle at the time of the Global Financial Crisis.

The NPL and past due ratios first went past four percent and five percent, respectively, in February this year. Pre-pandemic, the NPL ratio was stable in past years, even below two percent in 2018 and steady at the two-percent level in 2019 until the coronavirus spread around the globe. The ratio jumped from 2.48 percent in August last year to 3.51 percent by September. By December 2020 it was at 3.63 percent. Diokno said NPL ratio will breach six percent by the end of 2021.