CANBERRA, Australia – With the global catastrophe caused by the COVID-19 pandemic bringing even the biggest economies to a recession, the Big Four banks responded by giving repayment deferrals for personal loans and other loan reduction measures. Executives of these banks discuss it in recent parliamentary committee hearings.
The COVID-19 pandemic has brought the Australian economy to one of its lowest points, bringing the country to an economic recession it has never seen for the past 29 years. The National Debt Helpline has never been busier, taking hundreds of calls from Australians struggling from finances and debts seeking financial counsels.
Recent consumer data shows that many young Australians, aging from 18 to 34, struggle so much with their finances that they are three times more likely to engage with payday lenders for quick loans and two times more likely to apply for personal loans. There is an expected boost in the unemployment rate over a declining economy. These are issues also tackled by the latest sessions of the parliamentary house.
In the latest parliamentary committee discussions, the House of Representatives Economic Committee required the appearance of the Big Four banks of the country to discuss actions taken in response to the pandemic and what recovery path is at hand. The committee instigated this discussion to produce an extensive recovery plan for the whole economy, having insights from previous responses, anticipated repercussions, and other opportunities. The committee reiterated that a widespread economic recovery plan might involve drafting new lending laws, where the banks’ executives’ perception is vital.
Over the past months, where the pandemic outcomes were peaking worldwide, the government has provided a significant range of support and efforts to relieve its citizens. The government was active in giving relief measures, enacting more convenient monetary policies, and payment deferrals for personal loans, home loans, and other payments.
However, Moody’s, a credit rating agency, has also had a fair warning that a potential cliff for banks and the economy is still most likely to happen as the following government support is set to cease in the coming months gradually.
In the House of Representative Finance Committee’s hearings, the executives of the Big Four banks revealed their initial response to the economic decline and consumer crisis brought by the COVID-19 pandemic.
Westpac revealed that since the pandemic in March, the bank has already started giving relief and support for its customers. Westpac has deferred 138,000 home loans amounting to 52 billion dollars of balances in the mortgage. It has also provided 9.5 billion dollars of COVID-19 relief packages for more than 31,000 business customers across 76,000 accounts. With the help of the National SME Guarantee Scheme, it has also allowed over 2,100 business loans, with a total lent amounting to 258 million dollars. Finally, over 1.68 billion dollars using the Early Access to Superannuation Scheme were withdrawn by over 200,000 clients over the past months.
On the other hand, the Australia and Banking Group Limited or ANZ has provided significant support for personal loans and other bank loans. In the recent committee hearings, ANZ discussed that a primary response it enacted over the past months is granting repayment deferrals for all ranges of loans, including personal loans. Personal loan deferrals and term extensions were given to customers. In total, the bank reveals that from the end of March to August, it has already approved deferral applications for 16,000 unsecured loans.
Other responses ANZ initiated include a slash to home loan interest rates, home loan repayment deferral of up to six months valuing at 31.3 billion dollars. ANZ also granted business loan deferrals for 43,000 business loans or 6.4 per cent of ANZ’s total business loans. The bank has also enacted cuts to small business loan interest rates and has waived merchant terminal fees.
Commonwealth Bank has also provided a long list of COVID-19 responses the bank executed over the past months. The bank has allowed personal loan deferrals for up to 21,000 lenders. This value amounts to approximately 339 million dollars. Even personal customers for credit cards were given support during the crisis. Since March, Commonwealth Bank has had cuts on interests and waived off late personal credit cardholders’ fees. The bank has also approved over 19,000 deferrals for credit card payments.
Commonwealth Bank’s competitor, National Australian Bank, or NAB, has also acted in response to the economic shrinkage by approving more loan payment deferrals. NAB has approved personal loan repayment reduction to up to six months. This move is on top of interest cuts and cancelled late payment fees for its personal credit cardholders.
Furthermore, the bank has also provided support for small businesses allowing basis pointcuts, waived merchant terminal fees, and business loan deferrals to up to six months. Business loan balances report 20 billion dollars across 38,000 customers as of July. NAB now has an existing balance of 38 billion dollars from 86,000 deferred home loan payments as of August for home loans. This value represents a total of 12 per cent in the bank’s overall home loans.
Additionally, NAB has also presented a five-step recovery plan to give the economy a lift from the recession. The bank’s executive included tax cut legislation, infrastructure spending to create more jobs, speed up growth through residential construction, elimination of red tape for small businesses, and support for skilled workers and international students.