Since Luzon was sealed off, major business have suffered from revenue drought while lenders have scaled down operations by shortening banking hours and opening select branches.

Halfway through quarantine, banks say cash adequate, interest rates 'reasonable'

Ian Nicolas Cigaral ( - March 30, 2020 - 5:28pm

MANILA, Philippines — Big and medium-sized banks are pulling out all the stops to keep the country’s financial sector running halfway through the month-long Luzon lockdown by ensuring there’s enough cash in automated teller machines and loan interest rates are kept “reasonable.”

“As we move into week three of the (enhanced community quarantine), the impact of the crisis on the economy, including our corporate and consumer borrowers, is becoming more apparent,” Cezar Consing, president of the Bankers Association of the Philippines, said in a March 29 message to 45 universal and commercial banks.

“Our country needs our very best efforts in these difficult times,” he said.

Suzanne Felix, executive director of Chamber of Thrift Banks, another industry group, said separately in an e-mail: “Rates have remained steady, or calibrated, with concessions given to clients, depending on the situation they are in.”

Over the past two weeks of enhanced community quarantine when people are discouraged to go out, banks have responded to central bank calls to assist their customers, waiving fees in digital money transfers, as well as offering a 30-day leeway in paying their loans.

The month-long quarantine in Luzon, which is scheduled to lapse on April 12, was imposed by President Duterte to control the spread of coronavirus disease-19, which as of Monday afternoon has infected 1,546, 78 of whom died of complications to the disease. 

The sealing-off of the island, responsible for 73% of economic output in 2018, shuttered businesses, and left some of them including lenders on scaled-down operations either through shortened business hours or a skeletal workforce.

Apart from adequate cash in ATMs and keeping interest rates “as close as possible to pre-enhanced community quarantine levels,” Consing said banks are encouraged to open their branches whenever possible. 

Big lenders should also “contribute to stable and liquid financial markets,” he said in his message posted on BAP website. 

Savings banks also offer reprieve

For thrift banks, Felix said their members also stand ready to offer assistance to their clients, “upon their request,” while keeping most of their branches and ATMs open and available.

“These may come in the form of waiver of penalties or late charges, discounted fees, reduced loan amortization, reprieve on principal payments, or extension of loan term, which may require restructuring of loans to provide for additional funds for consumption and /or working capital,” Felix said.

“Payment arrangements will vary by bank and may be designed on a case-to-case basis to address their clients’ specific needs and cashflow situation,” she added.

Banks are expected to take a hit from the lockdown. Early this month, global debt watchers Fitch Ratings and S&P Global Ratings separately said disruptions caused by the quarantine could weigh on credit growth and bank’s profits this year.

While the aggressive move would benefit consumers through lower bank interest rates, the Bangko Sentral ng Pilipinas’ (BSP) 50 basis-point rate cut last March 19 would also hurt lenders as it means lower profits for banks for every peso they lend out.

On the flip side, BSP's latest decision to slash bank reserves by 200 bps starting March 30 is positive for banks looking to lend more.  

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