APRA backs banks offering relief to lockdown-impacted borrowers

As the lockdowns drag on, the prudential regulator is backing banks' play to help distressed borrowers

APRA backs banks offering relief to lockdown-impacted borrowers

The prudential regulator is backing up banks in their support of borrowers impacted by the latest round of COVID-19 lockdowns.

The Australian Prudential Regulation Authority announced Monday that banks offering support to COVID-impacted borrowers will not be required to treat deferred payments as arrears, according to a report by The Australian. The move comes as continuing lockdowns in Sydney and Melbourne have closed down the nation’s two largest metropolises.

Several banks have offered support measures to aid impacted businesses and home loan customers as the lockdowns cause economic disruption. On Saturday, the Australian Banking Association said it would launch a national support package that would offer repayment deferrals to small business customers with less than $5 million in turnover and loans less than $3 million, The Australian reported. Merchant terminal fees would be waived for up to three months, as well as fees and notice periods on cash deposits and farm management deposits.

ABA chief executive Anna Bligh told The Australian she was glad to see APRA supporting the banks’ moves to help borrowers.

“Banks have the financial firepower to help their customers through this period and have offered a range of support measures to small businesses and households,” she said. “APRA’s actions will further assist banks to provide support to customers all around Australia. Australian banks remain strong and stand ready to support Australians and the national economy.”

Read more: Borrowers will need to show hardship to get mortgage deferrals

APRA said it would provide regulatory relief to banks deferring customers’ loans. Banks that grant a repayment deferral of up to three months before the end of next month will receive the relief. However, the banks must be confident that borrowers were able to repay loans under the original terms of the deal, according to The Australian. Loans must also not already be 90 days past due or impaired at the time the deferral is granted.

APRA said the relief would be applied “regardless of whether or not the borrower has previously been granted a repayment deferral due to the impact of the pandemic.”

APRA will require banks to publicly disclose the nature and terms of any repayment deferrals and the volume of mortgages to which they are applied. The banks will also be required to provision for the potential loss of those loans, The Australian reported.

Ryan SmithRyan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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