Knowledge Highlights 5 June 2023
MAS and financial industry announce measures to support individuals and SMEs affected by Covid-19 pandemic
Knowledge Highlights 2 April 2020
On 31 March 2020, the Monetary Authority of Singapore (“MAS”), the Association of Banks in Singapore (ABS), the Life Insurance Association (LIA), the General Insurance Association (GIA) and the Finance Houses Association of Singapore (FHAS) announced a package of measures (“Announcement”) to help ease the financial strain on individuals and small and medium-sized enterprises (“SMEs”) caused by the Covid-19 pandemic, especially those facing temporary cash flow difficulties. The package of financial measures complements the initiatives in the Government’s Unity Budget and Resilience Budget to preserve jobs and support enterprises and households.
The relief for individuals and SMEs will be provided on an opt-in basis, as their cash flow circumstances will differ. The Announcement cautions on deferring payments as doing so increases future obligations and borrowers and policyholders should weigh their options carefully. The Announcement assures that financial institutions will process all applications expeditiously.
On 31 March 2020, ABS issued an announcement introducing a Special Financial Relief Programme (“SFRP”) for SMEs and individuals. The announcement states that customers should approach their banks through specified communication channels from 6 April 2020 to understand in greater detail how they may benefit from the programme. The ABS announcement also contains materials on the SFRP for SMEs and consumers.
Helping individuals with loan and insurance commitments
The Announcement introduces the following measures to help individuals with loan and insurance commitments:
- Defer repayment of residential property loans: Individuals with residential property loans may apply to their respective bank or finance company to defer either (i) principal payment or (ii) both principal and interest payments up to 31 December 2020. Interest will accrue only on the deferred principal amount, i.e. no interest will be charged on the deferred interest payments. Lenders will approve requests for deferment only if the individual is not in arrears for more than 90 days as at 6 April 2020. Individuals are not required to demonstrate any impact from Covid-19 to obtain the deferment.
- Lower interest on personal unsecured credit: Individuals with unsecured credit facilities from banks or other credit card issuers may apply to their respective lender to convert their outstanding balances to term loans at a reduced rate of interest, capped at 8% (compared to the 26% typically charged on credit cards). The term of the converted loan can be up to five years, depending on the individual’s ability to meet the minimum monthly repayment. This option is available to all individuals who have suffered a loss of 25% or more of their monthly income after 1 February 2020 and are at risk of incurring substantial arrears. Individuals may apply to their lenders to convert their outstanding unsecured debt from 6 April 2020 till 31 December 2020.
- Defer premium payments for life and health insurance: Individuals with life and health insurance policies may apply to their insurer to defer premium payments for up to six months while maintaining insurance coverage during this period. Premium deferment is available for all individual life and health insurance policies with a policy renewal or premium due date between 1 April 2020 and 30 September 2020. This measure supplements existing premium relief options available to policyholders, such as taking up premium loans against policy cash values or conversion to a paid-up policy by reducing the sum assured.
- Flexible instalment plans for general insurance: Individuals holding general insurance policies, such as for property and vehicles, may apply to their general insurance company for instalment payment plans while maintaining insurance protection. By working with their insurance company on an appropriate instalment plan, policyholders can pay their premiums in smaller amounts and enjoy coverage for the paid-up period, instead of paying a lump sum premium for the entire policy period at the start.
Supporting SMEs with access to bank credit and insurance cover
Banks and finance companies in Singapore have committed to help ease the financial strain on SMEs arising from the need to make principal repayments on their loans during this period, in view of the temporary cash flow constraints that many may face. The Announcement sets out the following measures:
- Defer payment of principal on secured SME loans: SMEs may opt to defer principal payments on their secured term loans up to 31 December 2020, subject to banks’ and finance companies’ assessment of the quality of the SMEs’ security. SMEs will also be able to extend the tenure of their loans by up to the corresponding principal deferment period if they wish. This relief will be available to SMEs that continue to pay interest and are in good standing with their banks and finance companies (not more than 90 days past due as of 6 April 2020). It is estimated that more than S$40 billion of existing loan facilities to SMEs will likely qualify for this opt-in relief scheme. Besides secured term loans, banks and finance companies also stand ready to work with SME customers to adjust their loan repayment schedules for other types of loan facilities.
- Lower interest on SME loans: Banks and finance companies may apply for low-cost funding through a new MAS SGD Facility for loans granted under Enterprise Singapore’s SME Working Capital Loan scheme and Temporary Bridging Loan Programme. Banks and finance companies can apply for these funds until end December 2020, provided they commit to pass on the savings in funding cost to their SME borrowers. This initiative potentially lowers the interest rates charged to eligible SME borrowers. Details will be provided at a later date.
- Assistance with insurance premium payments: Corporates, including SMEs, holding general insurance policies that protect their business and property risks may apply to their insurer for instalment payment plans. General insurance companies stand ready to work with their corporate customers so they can pay their premiums in smaller amounts and enjoy coverage for the paid-up period, instead of paying a lump sum premium for the entire policy period at the start.
Ensuring liquid and well functioning funding markets
MAS is providing sufficient liquidity to Singapore Dollar (“SGD”) and US Dollar (“USD”) funding markets in Singapore and supporting their effective functioning to enable financial institutions to fund themselves, intermediate credit to individuals and businesses, and provide essential financial services. The Announcement calls on banks to avail themselves of the liquidity facilities provided by MAS to bolster their ability to meet the SGD and USD funding needs of their customers.
MAS has been providing ample SGD liquidity to the banking system through its daily money market operations (“MMO”). MAS has also significantly stepped up its provision of USD liquidity to the banking system, increasing the volume of foreign exchange swaps transacted at its daily MMO by about 25% over the past two weeks.
On 26 March 2020, MAS established a new MAS USD Facility to provide up to US$60 billion of funding to support stable USD liquidity conditions. The USD funds are obtained through a swap facility between the MAS and the US Federal Reserve, which will enable Singapore to play its role in supporting USD funding markets in the region.
The following materials are available on the MAS website www.mas.gov.sg and ABS website www.abs.org.sg:
- MAS press release
- Annex on MAS and Financial Industry Support Measures 31 March 2020
- Infographic on MAS and Financial Industry Support Measures
- ABS announcement
- SFRP (Consumer)
- SFRP (SME)
- Frequently Asked Questions – SFRP (Mortgages)
- Frequently Asked Questions – SFRP (Unsecured)
Allen & Gledhill has a Covid-19 Resource Centre on our website www.allenandgledhill.com that contains published knowhow on legal and regulatory aspects of the Covid-19 crisis.
In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at firstname.lastname@example.org.
Knowledge Highlights 5 June 2023