Coronavirus: MAS move welcomed, but some analysts feel respite is temporary

The measures include possible deferred payments to banks and insurers and cash-flow support for small and medium-sized enterprises by ensuring access to bank credit.
The measures include possible deferred payments to banks and insurers and cash-flow support for small and medium-sized enterprises by ensuring access to bank credit.PHOTO: ST FILE

The latest measures rolled out by the Monetary Authority of Singapore (MAS) will help ease the financial strain caused by the Covid-19 outbreak, industry players and experts said, though some felt the respite would only be temporary.

The measures include possible deferred payments to banks and insurers and cash-flow support for small and medium-sized enterprises (SMEs) by ensuring access to bank credit.

Association of Small and Medium Enterprises president Kurt Wee said that the measures will keep liquidity in the business ecosystem and help businesses with their cash-flow needs.

"That is what we have been asking for," he said.

When asked if firms should be worried about incurring more debt when they defer payments, Mr Wee said: "That is a small cost, given the alternative (which is business closure)."

Maybank Kim Eng senior economist Chua Hak Bin said: "The deferment of loan instalment payments will help struggling individuals who may have lost their jobs or seen their take-home pay fall sharply."

Dr Chua added: "This will, however, only be a temporary respite. If the recession is deep and protracted, and unemployment remains high, defaults will inevitably rise."

He urged MAS to consider relaxing macro-prudential measures, which have tightened access to credit for individuals. Wage cuts and layoffs have affected individuals' ability to service their debts and qualify for loans, he noted.

CMC Markets' market analyst Margaret Yang said that the measures can contain the risk of potential cash-flow breakdown for SMEs and default on mortgage or insurance payments by those affected by Covid-19, preventing systemic risks.

CIMB Private Banking economist Song Seng Wun said that the measures, coupled with the relief rolled out in the Resilience Budget, provide comprehensive aid to affected firms and individuals.

But the depth of this crisis is still unknown, and the measures can only go so far to protect companies, he warned.

National University of Singapore Business School's Associate Professor Lawrence Loh said: "It is most critical that financial institutions demonstrate their social responsibility in such times as the gestures will be remembered long after the difficult episode."

RELIEF FOR INDIVIDUALS

The deferment of loan instalment payments will help struggling individuals who may have lost their jobs or seen their take-home pay fall sharply.

MAYBANK KIM ENG SENIOR ECONOMIST CHUA HAK BIN

Banks and insurers, including DBS, OCBC, United Overseas Bank, Citi, Tokio Marine and Prudential, said that they supported the measures rolled out yesterday.

OCBC global commercial banking head Linus Goh said that his bank has reached out to more than 6,500 of its SME customers since it announced its Covid-19 support measures in February. About one in three firms said that it would like help during this difficult period, he added.

Mr Goh said: "The (MAS) initiatives are designed to offer SMEs the urgent relief that they need and help them better manage their cash flows."

A version of this article appeared in the print edition of The Straits Times on April 01, 2020, with the headline 'MAS move welcomed, but some analysts feel respite is temporary'. Print Edition | Subscribe