Nearly $2 billion in loans deferred
Just under $2 billion in loans held by Bahamian credit holders have been deferred as a part of the loan payment deferral schemes implemented by various commercial banks in response to the financial crisis associated with COVID-19, The Central Bank of The Bahamas has reported.
In March, shortly after Prime Minister Dr. Hubert Minnis declared a state of emergency, forcing many businesses to close and furlough employees, the Central Bank brokered deals with lending institutions for a three-month deferral and credit support for borrowers in good standing with their banks whose debt servicing capacity had been adversely impacted by the pandemic.
Banks were required to keep meticulous records of those applications for loan deferral.
“The Central Bank implemented a monthly reporting template to facilitate monthly monitoring and analysis of these facilities, including impacts on non-performing loans (NPLs). The first reporting commenced for the period ended March 2020 and on a monthly basis thereafter. As at April 2020, the total loans under COVID-19 impacted deferral stood at $1.9 billion, representing 32.8 percent of total private sector credit,” the CBOB states in its most recent Monthly Economic and Financial Developments report for the month of May.
“Of this amount, consumer loans accounted for $832.4 million (45 percent) of the deferred facilities; residential mortgages, $725 million (39.2 percent); and commercial loans, $292.3 million (15.8 percent).”
Many commercial banks have already announced that they are continuing to provide accommodations beyond the initial three-month period of deferral.
While credit on repayments that have been postponed continued to accrue interest during the three-month deferral, the Central Bank stated that lenders may change their stances given the prolonged economic impact of the pandemic on many Bahamians and businesses.
“As impacted businesses and households develop more certainty around their financial circumstances, lenders may be required to cease interest accrual on some exposures. This would shift such balances to non-performing status,” the bank stated.
“The Central Bank is preparing tailored guidance for supervised financial institutions that would graduate the starting rate at which loan loss provisioning would be required, although those COVID-19 generated non-accruals that persist beyond the completion of the economic recovery would need to be provisioned at 100 percent.”
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