House's 365-day loan moratorium bid poses risks to finance sector —MAP

The Management Association of the Philippines (MAP) on Friday warned against the risks on the financial sector of the proposed one-year payment freeze on loans under the House of Representatives’ version of Bayanihan to Recover as Once Act, particularly on banks’ ability to serve withdrawals.

“The 365-day loan moratorium under the House version of the Bayanihan 2, while ostensibly good for our citizens in the short run, may have unintended adverse consequences for the country that can potentially exacerbate the negative impact of the pandemic,” MAP president Francis Lim said in a statement.

Under House Bill No. 6953 or the “Bayanihan 2,” approved by the House on Monday, banks, financial institutions, insurance firms, property developers, among others were directed to implemented a 365-day moratorium or grace period for the payment of loans, amortizations, without incurring additional charges.

The first Bayanihan law or the Bayanihan to Heal as One Act, banks and financial institutions were mandated to give a 30-day grace period for loan payments, at a time when most of the country was under the strictest quarantine classification.

“The moratorium will put at risk our banks' ability to service the withdrawals of their clients and adversely affect public confidence in the banking system,” Lim said.

“It will also drastically lessen the banks’ liquidity, curtailing their capacity to lend at a time when businesses badly  need capital to help them recover from the pandemic. This will cause grave damage to the economy that will require significant resources and time to repair,” he said.

Based on available figures, at least  P11 trillion, or roughly 78% of the total P14 trillion deposits have been loaned  to the public.

Meanwhile, around 70% of the depositors are non-borrowers.

“We strongly urge the Bicameral Conference Committee to adopt the Senate version of the Bayanihan 2 which limits the moratorium to one month,” Lim said.

MAP is a 68-year-old management organization whose over 1,000 members represent a cross-section of chief executive officers, chief operating officers, and the other top management practitioners from the largest local and multinational companies operating in the Philippines.

MAP also counts some top management educators and government officials as its members. —LBG, GMA News