Hypocrisy of banking institutions exposed
EVEN though some banking institutions have been purporting solidarity with government to provide relief to businesses hard-hit by Covid-19, the majority of the banks have been acting in contrast to what they offered to do.
The National Chamber of Commerce and Industry (NCCI) and Confidente have been inundated with clients who have experienced cruelty of the highest order with several banks and financial institutions threatening to shut them down, regardless of how many jobs are at risk.
When the Covid-19 pandemic started to wreak havoc, on March 30, the Bankers Association of Namibia (BAN) chairperson Sarel van Zyl offered to provide relief in the form of funding and holiday payments, but he was quick to point out that companies that were experiencing difficulties should contact their respective banks and consult with them about specific solutions going forward.
He emphasised that customers who have been impacted by the pandemic and therefore require a loan or payment relief as a result, should approach their respective banks to work out terms and find solutions that are beneficial to everyone.
BAN was reacting to the Bank of Namibia’s policy and regulatory changes in response to the impact by Covid-19 on the banking industry, where it encouraged commercial banks to offer a loan payment moratorium or so called payment holidays whereby the holiday in respect of a loan payment (which includes principal and interest) is allowed for a period ranging from six months up to 24 months based on a thorough assessment of economic and financial difficulties experienced by individual borrowers.
BoN empasised that banking institutions should apply such holidays in a transparent, fair and equitable manner.
Several businesses that approached Confidente bemoaned the treatment and lack of consistency they have been experiencing from commercial banks in terms of the Covid-19 relief packages.
Some businesses that had applied for relief, in terms of holiday payments when the relief measures were announced, only received their responses five months after they have been trapped in debt accumulation, only to be told that their applications had not been successful. Several banks have been threatening to institute legal action and even close down the businesses despite the promised relief programmes.
The BoN also extended an olive branch to the commercial banks by postponing the effective date of implementation on the 25 percent single borrower and concentration risk limit to allow banking institutions a wider scope to lend to vulnerable sectors of the economy.
The NCCI has recorded a high number of concerns from small to medium and private businesses that were discriminated in the promised debt repayment relief.
In order to assist banking institutions to institute adequate support measures to individuals, and small and medium sized enterprises, BoN has decided to relax the Determination on Liquidity Risk Management whereby banking institutions are required to ensure that their cash inflows match cash outflows within 0-7 days.
The BoN has also reduced the capital conservation buffer to enable banking institutions to use the capital they have built up during good times, to use during times of distress. The release of the buffer was to allow banking institutions to boost an already distressed economy by lending to the most vulnerable sectors.