COVID-19: Updates on regulatory and supervisory responses in Asia Pacific
- Loan classification, NPLs and provisioning
- Capital and liquidity buffers
- Other activities – stress testing, regulatory priorities, etc.
This newsletter provides an overview on the regulatory and supervisory responses to COVID-19 in Asia Pacific since the pandemic began.
Regulators in our region have responded in a number of ways, but the main actions have fallen into three general categories – 1. loan classification, NPLs, and provisioning; 2. capital and liquidity buffers; and 3. other activities like stress testing or reiterating regulatory priorities.
Going forward, the ACRS looks to provide regular updates on a weekly or bi-weekly basis of developments in our region. We would like to express our sincere gratitude to all our regular contributors from around the region who lend their expertise and insight to support the creation of this newsletter.
(The lists below are compiled on a best-efforts basis and are not exhaustive.)
Loan classification, NPLs and provisioning
HK HKMA - 06 Feb 2020
Measures to relieve impact of the novel coronavirus
The HKMA has been supportive of measures taken by AIs to support their customers. "Some AIs have informed the Hong Kong Monetary Authority (HKMA) that they plan to roll out temporary relief measures to help tide their customers over during this difficult time. Measures being considered include, for example, principal moratorium for residential and commercial mortgages, fees reduction for credit card borrowing, and restructuring of repayment schedules for corporate loans. The HKMA welcomes such initiatives, and would encourage other AIs to consider taking similar action".
SG MAS - 14 Feb 2020
MAS welcomes measures by financial institutions to support customers facing the impact of COVID-19
MAS has been supportive of measures taken by banks and insurance companies to support their customers. MAS has issued a circular to banks to advise that rescheduling of payments without material reduction in amounts due will not be regarded as restructuring that would trigger provisioning requirements.
JP JFSA - 25 Feb 2020
Cash flow support for companies as impact of COVID-19 outbreak grows
The JFSA requested financial institutions support the cash flow of corporate clients in light of the COVID-19 outbreak and its impact in a Statement by Aso Taro, Minister of Finance and Minister of State for Financial Services.
CN CBIRC - 01 Mar 2020
Order No.6  on Implementing Temporary Delayed Repayment of Principal and Interest for Loans of Small and Medium-sized Micro Enterprises.
Epidemic-hit SMEs and micro firms, including small business owners and individual household businesses, can make applications with banks to defer repayment of principal and interest expenses payable from January 25 to June 30, 2020. Overdue loan repayments in the period will not be subject to penalties.
This order is also to further relieve the difficulties in liquidity of small and medium-sized enterprises. It requires banking financial institutions to provide a special credit scale for Hubei Province, implement preferential internal fund transfer pricing, and strive to reduce the comprehensive financing cost of inclusive small and micro enterprises by more than 1% in 2020 compared with the average level of the previous year.
ID OJK - 05 Mar 2020
Coronavirus outbreak; OJK ready to provide additional stimulus
The OJK has announced two stimulus measures for the banking sector—both related to credit. The first is a relaxation in credit assessments for debtors affected by the viral outbreak, with up to Rp10 billion worth of loan ceiling eligible to those who pay their debts and interests on time. The second relaxation is to restructure the debts of those affected by the COVID-19, with loans above Rp10 billion.
ID OJK - 16 Mar 2020
POJK Impact Stimulus COVID-19
The OJK has released a new regulation (No. 11/POJK.03/2020) as the countercyclical impacts the coronavirus spread. The main points apply to BUK (conventional banks), BUS (sharia banks), UUS (sharia business units), BPR (rural banks), and BPRS (sharia rural banks). Banks can issue policies that support growth stimulus, restructure credit, and provide credit or financing to those who have received special assistance.
IN RBI - 21 Mar 2020
Indian banks seek easier loan repayment, NPA classification
The Indian Bankers Association has submitted a request list to the RBI and guidance on NPA / asset classification is expected soon.
MY BNM - 24 Mar 2020
Measures to assist individuals, SMEs and corporates affected by COVID-19
Banking institutions will offer a deferment of all loan/financing repayments for a period of 6 months, with effect from 1 April 2020. This offer is applicable to performing loans, denominated in Malaysian Ringgit, that have not been in arrears for more than 90 days as at 1 April 2020. For credit card facilities, banking institutions will offer to convert the outstanding balances into a 3-year term loan with reduced interest rates to help borrowers better manage their debt.
Capital and liquidity buffers
SG MAS - 13 Mar 2020
Singapore financial markets functioning well despite heightened volatility
MAS has been monitoring market functioning in Singapore closely and providing liquidity support to financial institutions where needed. The latest move announced by the Fed involves reactivating a USD swap line that was put in place during the global financial crisis. This will provide assurance on the availability of USD liquidity in the Asian time zone.
HK HKMA - 16 Mar 2020
Announcement by the Monetary Authority on Applicable Jurisdictional Countercyclical Capital Buffer Ratio for Hong Kong
The HKMA has lowered the counter-cyclical capital buffer from 2.0% to 1.0% with immediate effect.
NZ RBNZ - 01 Mar 2016
Financial system sound, and Reserve Bank providing additional support
At the end of 2019 the RBNZ released the final decisions from its comprehensive review of the capital framework for banks, which concluded that there should be a significant increase to the minimum capital ratio of banks. The purpose of this is to make the New Zealand banking system more resilient to financial and economic shocks. While these requirements were due to come into effect middle of 2020, the RBNZ has delayed the start date of the increased capital requirements for banks by 12 months to 1 July 2021 due to the impact of COVID-19. By delaying the start date of the requirements, the RBNZ aims to provide banks with more capital headroom to promote lending during these uncertain times. The RBNZ estimates that banks will have enough headroom to supply $47 billion more lending than would have been the case if the requirements were to come into effect.
JP JFSA - 01 Mar 2017
Bank subject to Basel standards may use capital buffer
In light of the outbreak of COVID-19 the JFSA affirmed that the banks subject to Basel international standards may use their capital buffer so as to absorb losses and maintain necessary funding to the economy under the stressed situation. Banks also may use liquidity buffer so as to absorb the liquidity shock under the stressed market environment.
AU APRA - 19 Mar 2020
APRA adjusts bank capital expectations
APRA announced temporary changes to its expectations for ‘unquestionably strong’ banking capital ratios, noting that banks may be required to draw down on capital to the minimum CET1 ratio of 10.5% in order to support the economy in light of the impact of COVID-19.
IN RBI - 16 Mar 2020
RBI Announces USD/INR Sell Buy Swap
On a review of current financial market conditions and taking into consideration the requirement of US Dollars in the market, it has been decided to undertake another 6-month US Dollar sell/buy swap auction to provide liquidity to the foreign exchange market. The auction will be multiple price based, i.e. successful bids will be accepted at their respective quoted premiums.
IN FEDAI - 19 Mar 2020
Temporary relaxations in Forex regulations
To provide relief for corporates’ forex risk management, based on FEDAI’s recommendation, the RBI has permitted relaxations with respect to the submission of underlying documents. FEDAI rules have been relaxed for Authorised Dealer banks to take delivery of overdue contracts or contract cancellation, and the due date of submission of all monthly/quarterly returns related to forex hedging has been extend to 30th Apr 2020 and may be further delayed.
IN RBI - 20 Mar 2020
RBI Announces OMO Purchase of Government of India Dated Securities
In light of current liquidity and financial conditions due to COVID-19, the Reserve Bank has decided to conduct purchase of Government securities under Open Market Operations (OMOs) for an aggregate amount of ₹30,000 crores in two tranches of ₹15,000 crores each in the month of March 2020.
IN SEBI - 20 Mar 2020
Regulatory measures taken by SEBI in view of ongoing market volatility
Regulatory measures taken by SEBI in view of ongoing market volatility owing to concerns relating to COVID -19 pandemic and the resultant fear of economic shutdown: revision of market wide position limit (stocks in F&O meeting certain criteria may be revised to 50% of existing levels – margins for these stocks have also been increased); increase in margin for non-F&O stocks in cash market; revised position limits in equity index derivatives; and flexing of dynamic price bands for F&O stocks.
MY BNM - 24 Mar 2020
Measures to Assist Individuals, SMEs and Corporates Affected by COVID-19
The Bank Negara Malaysia announced a number of regulatory and supervisory measures in support of efforts by banking institutions to assist individuals, small and medium-sized enterprises (SMEs) and corporations to manage the impact of the COVID-19 outbreak.
[Liquidity] Financial intermediation activities during this period is supported by sufficient liquidity in the banking system. BNM will also continue to supply daily ringgit liquidity to banks via various tools under the open market operations. BNM has also taken pre-emptive measures to boost liquidity through the recent reduction in the Statutory Reserve Requirement (SRR) ratio by 100 basis points, coupled with the additional SRR flexibilities granted to Principal Dealers.
[Capital] Banking institutions may drawdown on the capital conservation buffer of 2.5%, operate below the minimum LCR of 100%, and utilise the regulatory reserves that were set aside during periods of strong loan growth. The implementation of NSFR will proceed as scheduled on 1 July 2020; however, the minimum NSFR will be lowered to 80%.
HK SFC - 27 Mar 2020
SFC issues guidance to fund industry amidst COVID-19 outbreak
In view of the volatility in local and international markets related to the COVID-19 outbreak, the SFC today reminded fund industry participants and intermediaries of their obligations to look after the interests of clients. In a circular to managers, trustees and custodians of SFC-authorized funds, the SFC reiterated their obligations to properly manage the liquidity of funds and ensure fair treatment of investors in light of the current market situation. The SFC has stepped up its monitoring of SFC-authorized funds and should be given early warning of any material issues affecting them, the circular emphasized.
Other activities – stress testing, regulatory priorities, etc.
SG MAS - 09 Feb 2020
MAS Advises Financial Institutions to Adopt Recommended Measures for DORSCON Orange
MAS has reminded financial institutions to adopt BCPs and appropriate control measures and guard against cyber threats in this uncertain environment.
IN IRDAI - 04 Mar 2020
Guidelines on handling of claims reported under Coronavirus
The Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines for handling health insurance claims under coronavirus. The IRDAI is mandating insurers to expedite handling of the claims process and that the claims should be thoroughly reviewed before repudiating the claim. The claims shall include the costs of treatments as well as additional costs occurred during quarantine. It advises the insurers to design newer products covering treatment costs under coronavirus
IN RBI - 16 Mar 2020
COVID-19- Operational and Business Continuity Measures
The Reserve Bank of India issued COVID-19 Operational & Business Continuity Measures to highlight the need for a co-ordinated strategy for handling the emerging situations for protecting the resilience of the Indian financial system. Steps suggested by RBI to be taken by the respective banks/ financial institutions: devising strategy and monitoring mechanism concerning the spread of the disease; taking stock of critical processes and revisiting Business Continuity Plan (BCP); steps for sharing important instructions / strategy; and encouraging customers to use digital banking facilities as far as possible.
IN SEBI - 19 Mar 2020
Relaxation from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and certain SEBI Circulars due to the COVID -19 virus pandemic
SEBI has extended timelines for filings and allowed for a longer gap between two board/ Audit committee meetings.
AU APRA - 23 Mar 2020
APRA adapts 2020 agenda to prioritise COVID-19 response
APRA has suspended the majority of its 2020 policy and supervision priorities in order to free up capacity for regulated entities and APRA to focus on managing the impact of COVID-19 on customers and operations. Consultations for non-essential [topics?] are envisaged to be suspended until 30 September 2020 with considerations for adjusting implementation dates and transition timelines for finalised prudential standards. This comes after APRA released its Policy and Supervision priorities for 2020 on 30 January.
MY BNM - 24 Mar 2020
Measures to Assist Individuals, SMEs and Corporates Affected by COVID-19
BNM has reviewed its planned regulatory and supervisory activities in 2020 to ease compliance and operational burdens on banking institutions. In addition, BNM will be extending the timeline for all ongoing consultations on published discussion papers and exposure drafts to 30 June 2020 and beyond. Flexibility will also be provided for banking institutions to meet timelines for regulatory submissions.
- Australia, RBA - In a statement by RBA Governor Phillip Lowe on 19th of March, it was unveiled that the RBA will now target yields for 3-year Australian Government bonds at the rate of 0.25 per cent, the same as the cash rate. Read more here.
- Hong Kong SAR, HKMA (March 16) – Eddie Yue, the HKMA Chief Executive, made remarks reaffirming that the HKMA is paying close attention to the financial markets in light of the recent volatility and rate cuts made by the US Federal Reserve. Read more here.
- Hong Kong SAR, SFC - Joint Statement in relation to Results Announcements in light of Travel Restrictions related to the Severe Respiratory Disease associated with a Novel Infectious Agent. Read more here.
- Hong Kong SAR, SFC - Circular to Licensed Corporations Engaged in Asset and Wealth Management Activities - Asset and Wealth Management Activities Survey 2019. Read more here.
- Hong Kong SAR, IA - Temporary facilitative measures to tackle the recent outbreak of Novel Coronavirus. Read more here.
- Hong Kong SAR, IA - Compliance with CPD Requirements under the New Regulatory Regime for Insurance. Intermediaries – One-off Extension of CPD Fulfillment Deadline by 3 Months. Read more here and here.
- India - Indian banking Association (IBA) has made a five-point wish-list for the consideration of the RBI, and the request to defer term-loan installments for six months tops that charter of demands. Also on the list is an extension of the time period for classification of NPAs on short term loans like cash credits and overdraft and guarantees like letters of credit (LCs) from the present 90 days to 180 days. Read more here.
- Indonesia, BI - Observing the latest developments in the spread of COVID-19 in Indonesia, Bank Indonesia is committed to ensuring the maintenance of monetary stability, financial system stability, the implementation of safe, smooth, reliable and efficient payment system services, as well as ensuring the availability of rupiah currency in the community. Read more here.
- Japan, BOJ – The BOJ decided to expand the QQE in ETF, with additional tools for supporting the funding of business sector, at the extraordinary Monetary Policy Meeting on Mar 16 in reaction to the COVID-19 outbreak. Read more here.
- Mainland China, PBOC – So far, more than 1.8 trillion yuan of credit support has been provided for the fight against the epidemic. From January to February, the banking industry added 250 billion yuan of manufacturing loans, significantly higher than the same period last year. The 300 billion yuan special re-loan established on January 31 has supported more than 5000 key enterprises for epidemic prevention and control. Read more here and here.
- Malaysia - The Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) twice in this quarter; (1) by 25 basis points to 2.75% on 22 January 2020 and (2) by a further 25 basis points to 2.50% on 3 March 2020. The ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 2.75 percent and 2.25 percent, respectively. Read more here.
- New Zealand - On March 16 2020 the RBNZ reduced the OCR from 1.0 percent to 0.25 percent for at least the next 12 months. Read more here. Read more here.
- Singapore, MAS (March 13) - The Monetary Authority of Singapore (MAS) said today that the Singapore Dollar money market and foreign exchange market are functioning normally in the face of heightened volatility in global and domestic financial markets. MAS stands ready to ensure the orderly functioning of financial markets and the stability of the financial system in Singapore. Read more here
- Singapore, MAS – The Monetary Authority of Singapore issued an advisory to all financial institutions in Singapore, telling them to strengthen their social distancing measures. Measures include reducing traffic at customer-facing locations, cancelling or deferring all physical events, and promoting a safer workplace. Read more here.
- Singapore MAS, ACRA - The Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) are working with other government agencies to propose legislative amendments in relation to the conduct of shareholder meetings, which include general meetings and scheme meetings. The legislation amendments will allow issuers the flexibility to limit the number of participants in a physical meeting and for other participants to participate (which includes voting) by virtual means, or hold meetings solely by virtual means. Read more here.
- Singapore, SGX - Singapore Exchange Regulation (SGX RegCo) in consultation with the Accounting and Corporate Regulatory Authority (ACRA) and the Monetary Authority of Singapore (MAS) provided guidance on the holding of general meetings amid the COVID-19 situation (link). This is further to SGX RegCo’s announcement to allow issuers with a 31 December financial year-end, up to 30 June 2020 to hold annual general meetings (“AGMs”) to approve their 31 December 2019 (“FY Dec 2019”) financial results (link).
- Taiwan (province of China), FSC - In response to the recent new coronavirus, accounting firms cannot send staff to the mainland region to conduct audit work, which may affect the listed company announcement and declaration of 108 annual financial reports. The FSC has issued the relevant measures on February 25, 109, including that an accountant may implement alternative inspection procedures and listed companies to apply for extension of notice declaration related matters. Read more here.
- Taiwan (province of China), FSC - In response to the impact of severe COVID-19 on the industry, the FSC asked banks to cooperate with the Central Command Center and support to epidemic prevention including office closures, work-from-home, office inspection, BCP, and disinfection procedures. Read more here.