APRA extends crisis loan deferrals for banks

Sarah Kendell
— 1 minute read

The prudential regulator has paved the way for banks to give customers an extra four months’ repayment holiday on their loans, extending its temporary capital treatment for loans with repayment deferrals from six months to 10.

In a statement, APRA said it would write to all authorised deposit-taking institutions this week advising that the regulatory approach announced in March around the treatment of loans with deferred repayments was to be extended for a maximum of 10 months after the repayment deferral started, or 31 March 2020, whichever comes first.

The regulator announced earlier in the year that for six months, loans with deferred repayments need not be treated by banks as being in arrears for capital adequacy and reporting purposes.


“APRA’s expectation is that ADIs grant new or extended loan repayment deferral arrangements after undertaking an appropriate credit assessment to ascertain if an extension or new deferral is appropriate for the particular borrower given their circumstances,” the regulator said.

However, commenting on the approach, Australian Banking Association chief executive Anna Bligh said only those customers that were still in ongoing financial difficulty would be able to extend repayment deferrals.

“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it. Encouragingly, many customers have already chosen to resume making repayments,” Ms Bligh said.

The association stressed that repayment deferrals would “not be automatic”, and that customers with ongoing financial difficulty due to the COVID crisis would be contacted as they approach the end of their currently agreed deferral period “to ensure that wherever possible, they can return to payments through a restructure or variation to their loan”.

The ABA said over 800,000 bank customers had chosen to defer repayments on their loans as a result of the crisis.

In a media briefing earlier this week, investment manager T. Rowe Price cautioned that as much as 20 per cent of customers currently on a deferral would be unable to resume their normal repayments.


APRA extends crisis loan deferrals for banks
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