Banks step up to help customers take coronavirus hit
Announcements from Standard Bank, Nedbank and FNB come as the Reserve Bank works with sector to help shore up financial system
SA’s big banks are stepping up to help customers cope financially as measures to control the spread of the coronavirus in SA take their toll.
Announcements from Standard Bank, Nedbank and FNB followed a series of engagements between the SA Reserve Bank, President Cyril Ramaphosa, the Treasury and banking executives at the weekend on the resilience of the financial system.
The discussions come as global counterparts take unprecedented action to deal with the onslaught of the virus. On Sunday night, the US Federal Reserve announced unlimited quantitative easing, the asset-buying programme devised to inject money into the financial system.
The Reserve Bank, which last week slashed rates by 100 basis points for the first time in a decade, and announced additional liquidity measures, is contemplating more measures to ease pressure in the system.
Among new measures the Reserve Bank is believed to be considering are steps that would support banks providing payment holidays for some categories of customers, which would allow banks to restructure loans without requiring they classify these loans as “distressed”.
Banks would thus not have to increase the amount of capital they hold, which is usually a requirement for loan restructuring.
On Sunday, Standard Bank announced relief for small business owners and students. This has been followed by undertakings from Nedbank and FNB, which said on Monday they would support customers through economic hardships caused by the virus.
“We are living in an extraordinary time in world history,” Standard Bank CEO of personal and business Funeka Montjane told Business Day.
“We can see what is going on in our clients’ accounts, and we can see that there are certain pockets of our customers that are starting to take strain just because of social isolation,” she said.
The bank has introduced the coronavirus business interruption payment scheme. The scheme grants a three-month payment holiday to small-business clients in good standing with turnover of less than R20m a year.
Full-time students with loans from the bank will get a payment holiday from April 1 until the end of June at 0% interest and with zero fees.
She said that, given developments around the world including recession in China and the US, SA was likely to follow. “We thought, ‘Let’s be proactive instead of allowing our good customers to destroy their credit records’,” said Montjane.
The bank had experience in providing similar support, Montjane said. In 2010, in the aftermath of the financial crisis, it restructured between R30bn and R40bn of its home-loan book.
“We didn’t do mass scale repossession of properties, we did restructures [on loans] and we wish we had done it earlier, because by the time we did it in 2010 people had been in trouble for two years already,” she said.
Nedbank said in a statement on Monday that it would support clients in good standing with “suitable individual solutions to cash flow challenges they may experience as a result of Covid- 19”.
The support could include deferring payments on loan agreements with the bank, extending existing loan periods or extending additional credit to manage short-term cash flow shortfalls.
Meanwhile, FNB said it was working with the Banking Association SA in engaging the Reserve Bank and the government on solutions to support consumers and businesses, and would “make further announcements on the nature of this support in the days ahead”.
Measures by trade, industry and competition minister Ebrahim Patel to exempt banks from provisions of the Competition Act are also in the pipeline and will come into force this week.
The exemptions, similar to those gazetted for the health sector last week, will enable banks to discuss responses in a common forum and remove fears that one may gain a competitive advantage over the other.
Relief for small businesses could be effectively managed through the formal banking sector as many had overdrafts and loans, Patel said.