Banks vow to offer lifeline to customers hit hard by virus

Business

Banks vow to offer lifeline to customers hit hard by virus

Emergency measures include payment holidays for some customers and small businesses

Lynley Donnelly
Picture: 123RF/FUZZBONES
Picture: 123RF/FUZZBONES

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, hitting small businesses in particular.

Announcements from Standard Bank, Nedbank and FNB come as the SA Reserve Bank has been working with the sector to help shore up SA’s financial system against the economic onslaught of the virus.

Among the 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 both Nedbank and FNB, who said on Monday they would support customers through the economic hardships caused by the virus.

“We are living in an extraordinary time in world history,” Standard Bank’s 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 its small business clients in good standing, with turnover of less than R20m per year, a three-month payment holiday.

Full-time students with a loan from the bank will get a payment holiday from April 1 until the end of June at 0% interest and with zero fees.

Given developments around the world, including a recession in both China and the US, SA is likely to follow, she said.

 “We thought: ‘Let’s be proactive instead of allowing our good customers to destroy their credit records’,” said Montjane.

The bank has experience providing similar support before, Montjane said. In 2010, in the aftermath of the financial crisis, it restructured between R30bn to 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.

On Monday, Nedbank said 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.

FNB said it was working with the Banking Association SA in engaging the Reserve Bank and the government on solutions to support both consumers and businesses, and would “make further announcements on the nature of this support in the days ahead”.

The bank remained “open for business to assist small and medium-sized enterprises that qualify for credit to stabilise their cash flow and consumers who may want to cover unexpected expenses”. – with Carol Paton 

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