Issue directive on moratorium, don’t leave it to banks

KUALA LUMPUR, Jan 22 – The UMNO Youth Movement hopes the government will issue a clear instruction to banks during this MCO 2.0 and not leaving it to the discretion of the banks.
Its chief Datuk Dr Asyraf Wajdi Dusuki gave seven economic rationales why it needs to be done, namely:
1. Compared to MCO 1.0, the people are into more difficult time because many lose their jobs, having pay cuts and  allowances reduced, while the average business is severely affected and some even goes bankrupt due to the economic slowdown.
2. As the country’s economic situation is expected to be affected due to the implementation of MCO 2.0 and the Proclamation of Emergency, the business sector and small and medium industries are among the most affected and have not recovered after the first PKP, and this will definitely have a negative bearing on the economy.
3. Although the moratorium was given for at least 6 months during MCO 1.0, it turned out that the banking sector continued to record huge profits last year. There is no denying that there has been a slight decline in the profits of the banking sector but they still made huge profits.
4. The most important economic rationale during the crisis is to ensure that the people can continue their speding so that the money cycle continues to be vibrant and spur economy growth. Thus, the postponement of loan payments for a certain period of time can reduce the leakage of financial outflows from the economic cycle to inhibit the country’s economic growth and complicate the economic recovery process itself.
5. Statistics on the income of the banking sector in Malaysia, costs and profit before tax for this sector until the first six months of 2020 can be seen in figure 2.13 in the Bank Negara report which can be accessed at this link / fsr-2020 .
6. The extension of the moratorium period will not automatically bring problems to the bank. This is because in the latest Bank Negara report on Financial Stability under the heading Financial Institution Soundness and Resilience which can be accessed at this site , clearly states that the banking sector in Malaysia is in a position of powerful capital with ‘Aggregate Capital Buffers’ amounting to RM121.6 billion. This means that the banking sector is in a strong position to absorb any short-term pressures and losses.
7. With the strength of the financial sector that has strong capital resilience (well capitalized), the legitimacy of the moratorium order is automatically more important to reduce economic pressure in the real economic sector or real economy (non-financial), especially those involving consumer spending.