Reserve Bank announces additional measures with regard to preventing the spread of the Coronavirus

By Duncan Mlanjira

Reserve Bank of Malawi (RBM) has announced additional measures in response to some of the directives made by President Peter Mutharika on April 4, with regard to preventing the spread of the Coronavirus and mitigating the effects thereof.

RBM, which is the Registrar of Financial Institutions, has agreed with the Bankers Association of Malawi (BAM) that the commercial banks:

(i) Immediately provide a three-month moratorium on interest and principal repayments for loans by borrowers;

(ii) Restructure and refinance or renegotiate loans for small and medium scale enterprises, corporates and other borrowers affected by COVID-19 on a case by case basis;

(iii) Reduce by fifty (50) percent fees and charges related to internet banking, mobile payments and any other related services in order to encourage usage of electronic payment transactions; and

(iv) Suspend all payments of bonuses and dividends until the risk of COVID-19 is under control.

And actions by the Registrar of Financial Services include:

(i) Activate the Emergency Liquidity Assistance Facility and make it available to Banks on a case by case basis;

(ii) Approve the recapitalisation plan under the Prompt Corrective Action (PCA) Directive beyond 90 days in the unlikely event of a Bank breaching the Prudential Capital Requirement Directive as a result of COVID-19;

(iii) Reclassify loan facilities classifications as follows:

a) Where loans in Stage 1 and Stage 2 have been restructured or moratorium on repayments given, the associated Probability of Default (PD) shall not be changed or will be based on likelihood of payment of amounts due after the moratorium period ends.

Such facilities will not be adversely classified for reasons of restructuring and they will remain in the stage before restructuring;

b) If the facility in question still falls into Stage 3, (Default) after application of these relief measures, provisions in line with the Financial Services (Financial Asset Classification For Banks) Directive, 2018 shall be maintained;

c) A facility that had already been adversely classified, can be restructured, but will remain under Stage 3 as is the case under the Financial Services (Financial Asset Classification for Banks) Directive 2018 until the conditions leading to their classification are cleared.

Signed by RBM Governor Dalitso Kabambe and BAM president Kwanele Ngwenya, the statement said the measures are effective from midnight of April 9.