COVID-19 impact on economy, financial sector moderate: AMBD

Azlan Othman

The outbreak of COVID-19 represents a risk to economic growth this year as it disrupted sectors including air transport, restaurants and hotels, following the imposition of containment and preventive measures nationwide.

The extent of the impact will also depend on how soon economic activities can return to normalcy.

However, the impact on the country’s overall economy and the financial sector is expected to be moderate, as the transport and tourism sectors constitute a small portion of the economy. In terms of banks’ loans/financing, these two sectors constitute 7.2 per cent and 0.6 per cent of total loans/financing as of 2019.

This was highlighted in the Autoriti Monetari Brunei Darussalam’s (AMBD) bi-annual policy statement report for the first half of 2020 published on July 8.

“According to the Central Bank’s macro-prudential analysis of the financial sector, the overall financial stability risk is expected to be elevated in the first half of 2020,” said AMBD in its statement.

“This is mainly due to the rise in risks in the external sector, the domestic economy, offshore assets, as well as increased credit risk in the corporate sector arising from the COVID-19 pandemic crisis. The risks in banks’ income from offshore investments are also expected to be elevated and will be closely monitored, due to the high volatility in the international financial markets and very low short-term interest rates globally.

“The transport (especially aviation industry) and tourism sectors will be more severely affected in Brunei Darussalam. Thus, the credit risk of borrowers related to these sectors is expected to be elevated for the immediate term.”

AMBD also stated that in view of the ongoing COVID-19 pandemic, it has been in active engagement with key stakeholders including the Ministry of Finance and Economy (MoFE), as well as the Brunei Association of Banks (BAB), to address the negative impact of COVID-19 to the economy.

AMBD, together with BAB, agreed on a set of interim measures with the objective to alleviate the financial distress of the affected businesses and individuals.

Effective from April 1 the measures come in multiple forms which include principal deferment on loans/financing to the business and household sectors including personal loans/financing, property (home ownership and investment) and hire purchase facilities related to motor vehicle financing.

The deferments shall commence upon the banks’ approval, and the deferments will be applicable up to March 31, 2021, subject to individual banks’ further assessments.

There is also restructuring of personal loans/financing and hire purchase facilities of up to no more than 10 years; and affected borrowers in the private sector, including self-employed individuals, will have the option to convert their outstanding credit card balances into a term loan of up to three years, subject to individual banks’ further assessments.

Bank fees and charges related to these facilities, except third party charges, will be waived. And in facilitating the implementation of the interim measures undertaken by the banking sector, AMBD will further extend support to banks with flexibility to the Single Borrowing Limit.

In an effort to encourage social distancing and minimise unnecessary visits to banks, all online local interbank transfer fees and charges have been waived by banks for a period of six months between April 1 and September 30 for customers.