Banking News

Australian Banks Defer 643k Loans as Royal Commission Implementation Delayed

(11 May 2020 – Australia) Australian banks have deferred 643,000 total loans valued at over A$200 billion since the outset of the coronavirus pandemic to support business and retail customers, including an extra 100,000 loans in the last week.

CBA CEO Matt Comyn stated that the bank had witnessed a rebound in household spending over the past fortnight after a dramatic 20 percent decline through March and April. Mr Comyn warned that some businesses would collapse and households would require continued support from their banks well after the federal government is due to end its emergency assistance by the end of Q3 2020.

The early surge in requests to defer loan repayments has slowed, suggesting Australian banks are in a more resilient position than their international counterparts to weather the crisis and support the high number of business and household customers struggling to service loan repayments as restrictions are slowly lifted. The Australian Bureau of Statistics (ABS) recorded an enormous trade surplus in March as exports surged, imports weakened, the AUD rebounded from dramatic lows and services suffered as travel restrictions continue to bite, propping up GDP by up to 0.5 percent.

The new figures were disclosed as the federal government announced a six month deferment of unlegislated Royal Commission commitments as a direct result of the significant impacts of COVID-19.

The delay aims to ‘enable the financial services industry to focus their efforts on planning for the recovery and supporting their customers and their staff during this unprecedented time’, according to Treasury. Measures that the government indicated would be introduced into the Parliament by the end of H1 2020 will now be introduced by the end of H2 2020 while measures slated for the end of H2 2020 will now be introduced by H1 20201.

“This shows that the financial impact of the crisis is still unfolding and customers continued to need support from their bank to get through it. New data shows that in just one week an extra 100,000 customers have had their loans deferred, including 50,000 home loans, to take the pressure off household and business budgets as they navigate through this pandemic” said Australian Banking Association (ABA) CEO Anna Bligh.

“These updated figures, together with figures not previously reported, bring the total number of loans deferred by Australia’s banks as a result of the COVID-19 pandemic to over 643,000, of which approximately 392,000 are home loans. The total value of loans which has been deferred has increased by at least A$20 billion in just one week. These new figures shows banks working overtime to ensure assistance is given where needed to customers who are affected by this crisis. The surge in demand for assistance from banks shows that the economic impacts continue to be felt, and by no means is the nation through this crisis” she added.

"The overall economic impact, particularly if you use spending as a proxy, has been nowhere near as large as it has been in some countries. In the last fortnight we've started to pick up. That number of total spend is now down ten percent on the prior corresponding period" CBA CEO Matt Comyn stated.

“The announcement to delay Royal Commission commitments balances the need to implement the recommendations of the royal commission with the need to ensure our financial institutions are in a position to devote their resources to responding to the significant challenges posed by the coronavirus. The changes will also provide certainty and clarity to all stakeholders about the government’s commitment to implementing the recommendations arising out of the royal commission” Treasury said in a statement.