MAS, finance associations float support packages for individuals and SMEs

It aims to support SMEs with continued access to bank credit and insurance cover.

The Monetary Authority of Singapore (MAS), together with 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), revealed a series of support packages to help ease the financial strain on individuals and SMEs caused by COVID-19, an announcement revealed. pandemic.

These measures aim to help individuals meet their loan and insurance commitments, support SMEs with continued access to bank credit and insurance cover and ensure interbank funding markets remain liquid and well-functioning.

The relief for individuals and SMEs will be provided on an opt-in basis, as their cashflow circumstances will differ. Deferring payments increases future obligations and hence borrowers and policyholders should weigh their options carefully. Financial institutions will process all applications expeditiously.

First of the measures introduced is allowing individuals with residential property loans to apply to their respective bank or finance company to defer either principal payment or both principal and interest payments up to 31 December. Interest will accrue only on the deferred principal amount and no interest will be charged on the deferred interest payments.

Lenders will approve the request for deferment as long as the individual is not in arrears for more than 90 days as at 6 April. MAS also clarified that these individuals do not need to demonstrate any impact from COVID-19 to obtain the deferment.

Furthermore, individuals with unsecured credit facilities from banks or other credit card issuers may also 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 and it depends on the individual’s ability to meet the minimum monthly repayment.

However, MAS clarified that this option is available to all individuals who have suffered a loss of 25% or more of their monthly income after 1 February and are at risk of incurring substantial arrears.

Individuals may apply for this support package from 6 April to 31 December.

On the life and health insurance front, those with such life and health insurance policies may apply to their insurer to defer premium payments for up to six months, whilst 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 and 30 September.

This measure supplements existing premium relief options available to policyholders, such as taking up a premium loan against the policy cash value or converting to a paid-up policy by reducing the sum assured.

In addition, individuals holding general insurance policies, such as for property and vehicles, may apply to their general insurance company for instalment payment plans, whilst keeping their insurance protection. 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.

As for the SMEs, 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 cashflow constraints that many may face.

SMEs may opt to defer principal payments on their secured term loans up to 31 December, which is 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 firms that continue to pay interest and are in good standing with their banks and finance companies.

MAS is expecting that more than $40b of existing loan facilities to SMEs will likely qualify for this opt-in relief scheme.

Another support measure they announced is that 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.  These firms may opt for these funds until end-December, provided they commit to pass on the savings in funding cost to their SME borrowers.

Further, corporates holding general insurance policies that protect their business and property risks may apply to their insurer for instalment payment plans.

MAS stated that general insurance companies stand ready to work with their corporate customers so they can pay their premiums in smaller amounts and be given coverage for the paid-up period, instead of paying a lump sum premium for the entire policy period at the start.

Lastly, MAS assured that they are providing sufficient liquidity to the Singapore Dollar (SGD) and US Dollar (USD) funding markets in Singapore and supporting their effective functioning.  Financial institutions will be able to fund themselves, intermediate credit to individuals and businesses, and provide essential financial services.

“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,” the central bank said.