SINGAPORE (Mar 31): In light of the growing severity of the global Covid-19 pandemic, the Monetary Authority of Singapore (MAS) has teamed up the Singapore finance industry to introduce a package of financial measures to ease the financial burden on SMEs and individuals. 

The package comes on the back of a series of stimulus packages introduced by the Ministry of Finance amounting to a total of $54.8 billion to support the flagging Singapore economy in the coming year. All measures implemented are offered on an opt-in basis. 

See: Government goes all out in fight against Covid-19, sets aside additional $48 bil in supplementary relief package

Private sector partners include 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). 

“The shock to the economy from the Covid-19 outbreak is unprecedented. We must take extraordinary measures to address not just a health crisis, but what has developed to become a deep global economic crisis. As banks, it is our social responsibility to do our best to help our affected customers ride through these difficult times and help them recover as soon as possible,” said ABS chairman and OCBC Group CEO Samuel Tsien. 

The measures are designed 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 amid the global financial disruption. 

Under these measures, individuals will be able to defer repayment of their residential policy loans. Until Dec 31, 2020, they will be able to apply to their lender for deferment of payment of either the principal payment or both principal and interest payments, with interests accruing only to the principal amount. 

Personal unsecured credit will be subject to lower interest rates. From April 6 to Dec 31, 2020, individuals may convert outstanding balances on credit cards or revolving credit lines exceeding 30 days past due. The effective interest rate on such repayment is capped at 8% with a tenure of up to five years with a maximum monthly repayment of 3% of the amount owed. 

Insurance houses will allow clients to defer payment of insurance premiums on life insurance policies with a renewal or premium due date between April 1 and Sept 30, 2020, for up to six months. Flexible instalment plans will also be made available for general insurance premiums. 

SMEs will be granted the option of deferring principal payments on their secured term loans up to Dec 31, 2020, subject to banks’ and finance companies’ assessment of the quality of their security. 

Firms will also be able to extend the tenure of their loans by up to the corresponding principal deferment period should they continue to pay interest owed and remain in good standing with financial institutions. It is estimated that more than $40 billion of existing loan facilities to SMEs will likely qualify for this opt-in relief scheme. SMEs holding general insurance policies may also apply to their insurer to pay their insurance premiums in instalments. 

MAS has acted to lower interest rates on SME loans by extending a new Singapore dollar facility for loans granted under Enterprise Singapore’s SME Working Capital Loan scheme and Temporary Bridging Loan Programme. Banks and financial institutions may apply for these loans until December 2020 if they commit to passing on cost savings to SME borrowers. 

To ensure bank solvency during the downturn, the central bank has injected significantly more US dollar liquidity into the banking system. Aside from increasing the volume of its foreign exchange swaps by 25% during money market operations over the last fortnight, MAS has also drawn on a swap facility with the US Federal Reserve to provide US$60 billion ($85.5 billion) through a new MAS USD Facility on March 26. 

See: MAS establishes US$60 bil swap facility with US Fed to ease liquidity strain

MAS has also eased Singapore’s monetary policy by slightly lowering the mid point of the policy band of the Singapore dollar nominal effective exchange rate (S$NEER). This represents the most significant monetary easing since the Global Financial Crisis in 2009, which was the last time that MAS lowered the centre of S$NEER policy band.

See: MAS eases monetary policy as Singapore heads into a recession

MAS managing director Ravi Menon praised the financial sector’s public-spirited response to the Covid-19 pandemic. He attributed its ability to do so to the “deep capital buffers, ample liquidity, and low leverage” of Singapore’s financial institutions. 

“The package of measures they have put together speaks of a financial industry in Singapore that is robust, responsible, and purposeful. These measures will complement the government’s broader fiscal initiatives and help the Singapore economy recover more quickly and emerge stronger when the pandemic passes, ” he said.