Coronavirus Stimulus Package 2020 Latest announcements

Coronavirus Stimulus Package 2020

Latest announcements                                                                  20/3/2020
1. Banks to suspend SME Loan repayments
Australia's lenders will enable small business customers to defer their loan repayments for six
months in response to the economic fallout from the coronavirus outbreak.
Following consultation with regulators, the Australian Banking Association (ABA) has
announced a relief package for small business customers, which includes the suspension of
loan repayments for six months.
The relief package will apply to more than $100 billion of existing small business loans, which
according to the ABA, could provide up to $8 billion of relief to the sector.
“This is a multi billion dollar lifeline for small businesses when they need it most, to help keep
the doors open and keep people in jobs,” ABA CEO Anna Bligh said.
“Banks are putting in place a fast track approval process to ensure customers receive support
as soon as possible.
“Australia’s banks have supported the country through difficult times in the past and continue
to do so."
Ms Bligh said the package would complement the federal government and the Reserve Bank
of Australia's (RBA) stimulus packages for small businesses.
“Over the last few days banks have worked closely with the Treasurer and the Government to
identify measures to support the economy through this crisis," she said.

“Small businesses are the most vulnerable part of the economy and have the most urgent
need for assistance.
“Small businesses employ five million Australians and this package is designed to help them
keep doing just that."
She continued: “Small businesses can rest assured that if they need help, they will get it. Banks
are already reaching out to their customers to offer assistance and packages will start rolling
out in full on Monday."
The package is subject to authorisation by the Australian Competition and Consumer
Commission (ACCC).
The ABA CEO noted that mortgage customers would not be eligible for repayment relief at
this stage, but added that banks would consider the move if the situation deteriorates.
"The package that supports small businesses is designed to impact the most critical and urgent
need, and that is loan repayments for small businesses," she said.
"At this stage, banks report that they are not seeing any high volume of anyone in distress with
mortgages, but what they are seeing is a rapidly and exponentially increasing volume of calls
from small businesses in distress and unable to meet payments.
"This package is designed to go [as] fast as possible to small businesses because that is where
it is needed most today in order to avoid more people being out of work and then falling into
mortgage stress."

www.perrierryan.com.au                                                           March 2020
Phone: 3391 7566

Coronavirus Stimulus Package 2020

Ms Bligh added: "We understand that this is a very rapidly moving circumstances. As the
government is having to evolve their response, if there is a need as it emerges in relation to
mortgages, we will of course look at what might need to be done."
This comes just a day after Prime Minister Scott Morrison announced that in addition to the
$17.6 billion stimulus package announced earlier this month, the government would
provide $15 billion in new funding for low-cost small business loans, facilitated by the
Australian Office of Finance Management (AOFM),
Following its cut to the cash rate, the RBA also announced a new term funding facility (TFF) for
the banking system, aimed at supporting the flow of credit to small and medium-sized
businesses by providing authorised deposit-taking institutions (ADIs) with three-year funding
facilities at a fixed rate of 0.25 per cent.
Under the TFF, ADIs will be able to obtain initial funding of up to 3 per cent of their existing
outstanding credit and will have access to additional funding if they increase lending to
business, particularly small and medium-sized businesses (SMEs).
The Australian Prudential Regulation Authority (APRA) has also announced that it will make
temporary changes to its expectations regarding bank capital ratios to “ensure banks are well
positioned to continue to provide credit to the economy”.
APRA noted that with banks maintaining capital levels “well above minimum regulatory
requirements”, it would be appropriate to enable them to use the “large buffers” they’ve
established to facilitate ongoing lending to the economy.
As a result, provided that banks meet their minimum capital requirements, it “would not be
concerned” if they were not meeting the additional benchmarks announced in 2016 during the
period of disruption caused by COVID-19.
                                                           Material provided by Mortgage Business 20/3/2020

2. First major responds to emergency RBA cut
The first major bank responded to yesterday’s out of cycle cash rate cut mere minutes after
the Reserve Bank of Australia’s (RBA) announcement.
CBA has expanded its support for small businesses and households through a range of new
measures, part of which sees the major introducing its “lowest advertised interest rate ever”;
however, despite expectations, the bank has only adjusted its fixed rates, leaving variable rates
unchanged.
“These are unprecedented times, and they call for unprecedented measures,” said CBA CEO
Matt Comyn.
“Following [the] reduction in the official cash rate by 25bps, we are taking deliberate steps to
further support parts of the economy most in need.
“In particular, we want to ensure that we help keep small businesses open so that they can
keep Australians employed, and that we do everything we can to support households and
older Australians.”
CBA’s measures announced yesterday include:
   •   100 bps interest rate reduction for all existing cash-linked small business loans
   •   70 bps interest rate reduction in 1-, 2- and 3- year fixed home loan rates for owner
       occupiers paying P&I to 2.29% p.a.
   •   60 bps increase in 12-month term deposits to 1.70% p.a.

www.perrierryan.com.au                                                               March 2020
Phone: 3391 7566

Coronavirus Stimulus Package 2020

   •   Changes to home loan repayments which will release up to $3.6 bn in cash for
       Australian households
“For home owners, we are announcing our lowest advertised interest rate ever – 2.29% p.a.
fixed for one, two and three year terms for owner occupier customers on principal and interest
repayments,” said Comyn.
“We are making this offer available to new and existing customers allowing them to lock in
historically low rates."
The bank also announced plans to help up to 730,000 customers through reducing
repayments to the minimum required under their home loan contract, from 1 May.
“On average, this will release up to $400 per month for customers and create up to $3.6bn in
additional cash support for the economy,” Comnyn explained.
“Our owner occupier principal and interest customers are, on average, 37 months ahead on
their home loan repayments. Customers will be able to opt out after the change is effective
should they wish to keep their current repayments.”
CBA plans to contact customers with more information in early April, and has
emphasised there is no need for customers to reach out before then.
“We understand the ongoing uncertainty as the nation responds to the challenges posed by
the coronavirus. Australia has a strong financial system and economy, and we stand ready to
support our customers, our people, our suppliers and the economy at this time,” the CEO said.
“Commonwealth Bank’s strong financial position means Australians can have confidence in
our ability and willingness to support the country at this time.”
                                                           Material provided by Australian Broker 20/3/2020

3. NAB to freeze repayments for distress mortgage customers
The major bank has announced it would enable home loan customers to suspend their
repayments for up to six months in light of the economic impact of the coronavirus outbreak.
NAB has announced a support package for business and personal customers in response to
the economic fallout from the coronavirus (COVID-19) outbreak.
In line with the Australian Banking Association’s (ABA) announcement earlier today, NAB will
enable business customers experiencing financial difficulty to defer their payments on floating
and variable rate business loans for up to six months.
However, NAB has also announced that it would extend the offering to home loan customers
experiencing financial hardship.
Mortgage customers will be able to pause home loan repayments for up to six months,
including a three-month checkpoint. For a customer with a typical home loan of $400,000, NAB
said this could mean access to an additional $11,006 over six months, or $1,834 per month.
Customers also have the option of reducing repayments on their variable rate home loans.
In addition, NAB will:
   •   cut 200bps from interest rates on new loans and all overdrafts on its flagship digital
       business product QuickBiz, effective March 30.
   •   reduce variable rates on small business loans by 100bps, effective March 30
   •   reduce fixed home loan rates by up to 60bps (with rates starting from 2.19 per cent)
   •   introduce a 10-month term deposit rate of 1.75 per cent for depositors

www.perrierryan.com.au                                                               March 2020
Phone: 3391 7566

Coronavirus Stimulus Package 2020

Like the Commonwealth Bank of Australia (CBA), NAB will not reduce variable home loan
rates, despite the Reserve Bank’s emergency cut to the cash rate.
The bank has suggested that its package could provide a potential injection of more than $10
billion into the economy over six months, or $380 million a week, depending on customer
needs and take-up.
NAB CEO Ross McEwan said: “Our focus is clear – to support our business and personal
customers with their financial needs when they need it most.
“These measures will provide significant relief to businesses and homebuyers over the next
six months as we all deal with this unprecedented situation.
“Businesses in particular need help and they need it now, so we have come through with a
range of measures. This support will provide cash flow relief so they can stay open, and keep
people in jobs. One third of Australia’s small to medium businesses bank with NAB and we are
going to be there for them.”
                                                              Material provided by The Adviser 20/3/2020

REMEMBER: OSR has announced a package that is now available to support businesses
affected by COVID-19

    No doubt, there will be further updates as this rapidly evolving health and economic
                                challenge continues to unfold.

www.perrierryan.com.au                                                            March 2020
Phone: 3391 7566

Coronavirus Stimulus Package 2020

Published 20/3/2020

www.perrierryan.com.au              March 2020
Phone: 3391 7566