The Australian Prudential Regulation Authority (APRA) has announced it will extend its temporary acceptance of deferred bank loans to support them bringing relief to cash-strapped customers.
The Authority’s move means that banks allowing borrowers affected by the COVID-19 pandemic to defer loan repayments for a period of up to six months will not have to treat the deferral period as a period of arrears in their reports to APRA.
While the provision has been in place since 23 March, APRA now intends to write to all Authorised Deposit-taking Institutions (ADIs), advising them of its decision to extend the maximum period for a repayment deferral to 10 months from the start of the deferra, or until 31 March 2021, whichever comes first.
In a statement, APRA said applications for new or extended loan repayment deferral arrangements should only be approved after making an appropriate credit assessment.
“APRA will also provide an adjustment to the normal regulatory treatment of loans that are restructured,” it said.
“Where an ADI restructures an affected borrower’s facilities before 31 March 2021 with a view to putting the borrower on a sustainable financial footing, the loan may continue to be regarded as a performing loan for capital and regulatory reporting purposes.”
Chair of APRA, Wayne Byres said the measures were designed to incentivise ADIs to continue to support their customers through an extended period of uncertainty, while at the same time facilitating the restructure of eligible loans in a measured and timely manner.
“We are fortunate that the Australian banking system has the balance sheet strength to be able to provide ongoing support to customers temporarily impacted by COVID-19,” Mr Byres said.
“This will help to avoid unnecessary hardship and foreclosures, and allow the banking sector to work with its customers to find the best solution to manage their debts,” he said.
