Central Bank revises policy to avoid premature withdrawal of COVID-19 relief measures
The Bank of Namibia has amended some key provisions to safeguard against premature withdrawal of support measures introduced to mitigate the effects of the pandemic on the economy, businesses and individuals.
The Determination on Policy Changes in Response to Economic and Financial Stability Challenges (or BID-33), was first introduced by the Bank on 01 April 2020.
Bank of Namibia Governor, Johannes !Gawaxab said the factors that necessitated the amendments include the ongoing macroeconomic strain and the uncertainty surrounding emerging COVID-19 variants and their concomitant impact on the economic activities at large, which continue to delay economic recovery.
“Whilst banking institutions remain adequately capitalised and profitable, prolonged economic distress, beyond the initially considered timelines, require amendments with respect to remedial measures,” he said.
As per the new amendments, Bid-33 has been revised to remain in place for an additional twelve months, until 01 April 2023, as opposed to the initial twenty-four months.
The loan repayment moratorium provided in the Bid-33 has been revised from the current 6-24 months to a period of 1-24 months, removing any inconsistent treatment of moratoria of less than six months.
Similarly, banking institutions are prohibited to charge clients higher, punitive interest rates, in excess of the initial contractual interest rate, following the expiration of any COVID-19 related loan moratorium imposed.
“Banking institutions are only allowed to charge an administrative fee of the extension of a loan moratorium at the initial extension, where after no administrative fee or charge for the roll over of the facility may be charged to a customer,” !Gawaxab said.
Further, the amendments now require that banking institutions implement a once-off collateral haircut of 30% on loans once they become non-performing.
Moreover, liquidity relief measures for the banking institutions previously introduced for a
period of 6 months have been reintroduced for the duration to ensure liquidity relief in the 0-7 day and 8–31-day time buckets.
In the case of credit bureaus, banking institutions, as credit providers, should not report those benefiting from a loan moratorium rolled over for less than 12 months as delinquent to credit bureaus, as per the new amendments. This is to ensure banking customers are not unduly impacted by negative credit bureau listing as a result of the implementation of Bid-33.
“The Bank will continue to closely monitor developments and response of banking institutions to these measures in order to ensure and maintain a sound monetary and financial system in Namibia amid economic challenges posed by COVID-19 outbreak,” !Gawaxab stressed.