The Bank of Namibia has extended the COVID-19 banking sector relief measures by 12 months and also made key amendments to the Determination on Policy Changes in Response to Economic and Financial Stability Challenges introduced in April last year.
BoN Governor Johannes !Gawaxab said while the central bank wants to safeguard the stability of the financial system, it also needs to guard against premature withdrawal of support to the economy and mitigate effects of economic scarring.
“The Bank is committed to ensure that no early withdrawal of the COVID-19 relief measures would be considered without due assessment and analysis of the potential impact on the banking industry, individual households and businesses. These measures were also taken to safeguard a sound monetary, credit and financial system, whilst providing much-needed relief to borrowers,” he said.
He added that the continued uncertainty regarding COVID-19 variants and their effect on the economy had influenced the amendments effected by the central bank.
“The factors that necessitated the amendments include the ongoing macroeconomic strain and the uncertainty surrounding emerging COVID-19 variants and their concomitant impact on the economic activities at large, which continue to delay economic recovery. Whilst banking institutions remain adequately capitalised and profitable, prolonged economic distress, beyond the initially considered timelines, require amendments with respect to remedial measures,” !Gawaxab said.
The BoN amendments are as follows:
• The loan repayment moratorium provided in the Determination has been revised from the current 6-24 months to a period of 1-24 months, thus removing any inconsistent treatment of moratoria of less than six months.
• Banking institutions are prohibited to charge clients higher, punitive interest rates, in excess of the initial contractual interest rate, following the expiration of any COVID-19 related loan moratorium imposed. Similarly, banking institutions are only allowed to charge an administrative fee of the extension of a loan moratorium at the initial extension, whereafter no administrative fee or charge for the rollover of the facility may be charged to a customer.
• A general loan moratorium, as a result of COVID-19 distress will not result in adverse classification at the initial extension of a loan moratorium of any allowable duration, i.e., one to twenty-four months. Should this moratorium, however, be rolled over based on prolonged distress it will be viewed as demonstrating increased credit risk once the cumulative moratorium amounts to twelve (12) months. Such a loan will then be classified accordingly.
• The Determination now requires that banking institutions implement a once-off collateral haircut of 30% on loans once they become non-performing. This collateral haircut will be maintained at 30% or increased as a result of the discounting of collateral over time using the IFRS 9 models to ensure collateral values realistically reflect current collateral market values.
•The liquidity relief measures for the banking institutions previously introduced for a period of 6 months have been reintroduced for the duration of the Determination to ensure liquidity relief in the 0-7 day and 8–31-day time buckets. The relief measures cited are as before.
• In order to ensure that banking customers are not unduly impacted by negative credit bureau listing as a result of the implementation of the Determination, banking institutions, as credit providers, should not report those benefitting from a loan moratorium rolled over for less than 12 months as delinquent to credit bureaus.
