Financial institutions in Australia have responded to support business loan clients during the coronavirus or COVID-19 crisis. These leading banks have taken several measures to alleviate the detrimental impacts of the pandemic to the country’s small businesses. The financial establishments that took immediate steps are the Big Four Australian lenders. They are the Westpac Banking Corporation, Australia and New Zealand Banking Group, National Australia Bank, and the Commonwealth Bank of Australia. In early April 2020, these significant banks announced the ways on how they are aiding their small business customers. These Australian lenders’ relief measures are on the same page as the current advocacy of the Reserve Bank of Australia. The latter has encouraged the banks to be at the side of their business and retail customers.
Reserve Bank of Australia Governor’s Call to Action for Banks
In mid-May 2020, Philip Lowe spoke via Webinar to Australia’s Council of Financial Regulators. In his speech, the Reserve Bank of Australia Governor called on the financial institutions of the country to be confident in allowing their clients to borrow funding. Lowe pointed out in the special session that these banks should not feel frightened to lend amid the coronavirus crisis. Moreover, the chief of the Reserve Bank of Australia affirmed the significance of banks’ continuation of support to the flow of credit into the national economy. He stressed that Australian financial firms have an essential role to play in helping the country survive the global healthcare calamity.
Lowe cited that there is a limitation to what they can accomplish via monetary policy at the Australian central bank, including the cash rate slashes. Hence, he pointed out that it is both prudent and advantageous that banks utilise their existing capital and liquidity buffers to assist the national economy. During adverse scenarios, capital and liquidity buffers serve as solutions, giving banking organisations the means to support a country’s economy. Moreover, capital and liquidity buffers permit financial establishments to carry on helping businesses and households. Under the banking laws of Australia, these safeguards are stringently compulsory. Also, capital and liquidity buffers primarily function as rainy day funds for the lenders to stay topped up, and in case of emergency, the banks can use these protective mechanisms.
Lowe sought the Australian banks to draw on the capital and liquidity buffers that they had built up before the coronavirus crisis. The Reserve Bank of Australia head pointed out that the country should not anticipate witnessing the cushions maintained during a once-in-a-century pandemic. He said that now is the moment to employ these solutions that banks designed for disasters. Plus, Lowe remarked that some decrease in capital ratios is wholly acceptable because banks support their clients through the difficult times.
Four Major Australian Banks Helping Small Businesses amid COVID-19
The coronavirus crisis has led to the shutdown of plenty of small enterprises in Australia. The state and federal governments nationwide mandated these commercial ventures to cease their operations for the meantime. Their step meant to restrict the spread of the disease that has affected the local enterprises adversely. Small retail establishments have had to face customer numbers dropping and falling revenues as among the COVID-19 repercussions. Nevertheless, the Big Four Australian banks have done their part to assist. They have targeted the mitigation of the adverse effects of the coronavirus pandemic to the financial affairs of the small businesses. Business loan clients can expect some relief from the deals that the major Australian banks have offered.
Here are details regarding the assistance that the Big Four lenders have made available to small business establishments starting April 2020:
(1) National Australia Bank
Business loan clients can borrow funds at the National Australia Bank via the small business loan guarantee scheme. Furthermore, the leading lender is allowing the repayments on loans for small business customers to get paused for up to six months. Entrepreneurs who are business credit cardholders of the National Australia Bank can also avail repayment deferrals that the financial firm has permitted. Finally, the Australian financial institution is waiving the rental fee for Electronic Funds Transfer at Point of Sale or EFTPOS terminals for up to six months.
(2) Australia and New Zealand Banking Group
At Australia and New Zealand Banking Group, business loan customers that have a turnover of up to $50 million per year can borrow up to $250,000. This kind of borrowed funding is under the loan guarantee program of the Morrison government. Also, capitalisation of the interest accumulated during the term is a feature of the government loan offering. The arrangement will offer a postponement of repayments for a period of up to six months as well. The Australia and New Zealand Banking Group is also allowing their small business clients to put their repayments on hold for up to six months. These customers are those that have secured term loans of up to $10 million. Furthermore, the major banking organisation has proclaimed the capitalisation of interest run up during the period, as well as the availability of overdraft increases.
(3) Westpac Banking Corporation
Small business clients can borrow funds under the small business loan guarantee scheme at the Westpac Banking Corporation. The leading bank is offering this deal on the same terms as the other leading Australian financial institutions. Furthermore, the small business customers of the bank that have loaned a total of up to $10 million are eligible for postponing their repayments for up to six months. The Westpac Banking Corporation is capitalising interest as well. Meanwhile, as for the equipment finance loans’ establishment charge, the bank has cut this fee to zero. Clients of the bank can enjoy this benefit until the culmination of June 2020. Small business owners can benefit from the bank’s step of putting off business credit card payments for three months as well. Plus, without the interest rate getting slashed, business term deposit clients can obtain funds. The Westpac Banking Corporation is refunding the costs that entrepreneurs pay to have EFTPOS terminals in their commercial establishments for up to three months.
(4) The Commonwealth Bank of Australia
The primary Australian lender’s small business clients can enjoy the bank’s automatic deferral of repayments between April and June 2020. These customers are those that took out loans worth up to $5 million. The Commonwealth Bank of Australia is also permitting a further postponement of repayments if their small business clients require it. The bank pointed out that, depending on the kind of loan, interest run up during the period would be due at the end of the loan term or would get capitalised. The Commonwealth Bank of Australia also revealed other assistance to small businesses during the start of the second quarter of 2020. They include early redraw charges on business term deposit accounts, the waiving of merchant terminal fees, as well as the establishment charges and surplus interest on temporary excess products.
The deals that the Big Four Australian banks declared get modified frequently. Small business owners should keep in mind that the limits on the eligibility for support and the availability of fee reductions and waivers differ from bank to bank. Therefore, before making any financial decisions, business loan clients need to conduct some verification with their lender. Commercial establishments in Australia will undoubtedly benefit from the measures that the four leading banking organisations have implemented. These lenders are advancing the interest of the broader Australian society as the latter enters the recovery phase. The relief solutions from the Big Four banks can mitigate the dire impacts of the coronavirus crisis to commerce and aid businesses to expand again.