Only 7 of the 26,194 Commercial Loans Deferred in the Currency Union were from Montserrat

Of the more than 26000 commercial loans which have been deferred this year due to the COVID-19 pandemic within the Eastern Caribbean Currency Union only seven of them were from local commercial banks.

This was revealed in the latest communique issued at the end of the 97th Meeting of the Monetary Council of the Eastern Caribbean Central Bank (ECCB), which was held last Friday, via videoconference, under the Chairmanship of Dr. Timothy Harris, Prime Minister and Minister for Finance, Saint Christopher (St Kitts) and Nevis.

Following the global shutdown from COVID-19 in March, the ECCB reached an agreement with the ECCU Bankers Association on a loan deferral (moratorium) programme for customers for up to six months. A waiver of late fees and charges was applicable to eligible customers during that period. Last month, the bank noted that “the unprecedented situation that we recognised in March 2020 has not yet shown signs of significant improvement, and more lives and livelihoods have been impacted by the significant downturn in our economies, especially relating to the Tourism Sector on which the Eastern Caribbean Currency Union so heavily relies. Consequently, we have taken the collective decision to maintain the support programme, as we continue to navigate the pandemic together.

“Going forward, the loan repayment deferral programme (moratorium) will be based on an assessment of the financial condition of customers.   In their sole discretion, banks in the ECCU region will consider extension requests up to a maximum period of 12 months from 1 October 2020,” the bank stated.

However, the seven loans deferred via the Bank of Montserrat and local branch of the Royal Bank of Canada are not the full story. The St. Patrick’s Cooperative Credit Union, which has traditionally held the second largest portfolio of loans on island also used their discretion to support local businesses with deferments. According to Credit Union General Manager Peter Queeley “The SPCCU deferred 52 loans in total. Twelve (12) of those deferred related to persons who represented owner operated small business.”

The Communique noted that the Monetary Council received the Financial Stability Report for the ECCU for the period January to September 2020.  The key highlights of the Report were:

  1. The ECCU’s financial system remained stable during the first nine months of 2020. However, vulnerabilities exist including an elevated level of non-performing loans, which is likely to increase following the expiration of the COVID-19 Loan Repayment Deferral Programme (loan moratorium).
  2. As at 31 August 2020, Licensed Financial Institutions (LFIs) reported moratoria on 26,194 loans with a total outstanding balance of $5.2 billion, which represents 39.3 per cent of total loans. Figures 1 and 2 below show the results of the Loan Repayment Deferral Programme granted in ECCB member countries.

 Figure 1 – Uptake of Commercial Banks’ Loan Repayment Deferral Programme

Figure 2 – Uptake of Commercial Banks’ Loan Repayment Deferral Programme

The communique noted that the Monetary Council was apprised that the ECCB continues to provide regulatory guidance to licensees and is cooperating with national regulators on appropriate guidance for the entire financial system. Additionally, national regulators in the ECCB member countries are continuing their work with the insurance and credit union sectors to mitigate emerging risks.

The ECCB has noted that each member bank is expected to advise its customers of the details and process for the loan deferment programme, however some basic guidelines for granting of the moratorium will apply.  These include:

  1. Consideration for extensions shall be based on a review and assessment of the customers’ circumstances by the Bank and a request/application for extension by the customer.
  2. Banks will monitor the customers’ circumstances on an ongoing basis during the given period of the moratorium.
  3. The terms and conditions of the moratorium granted shall allow the Bank, in consultation with the customer, to curtail the moratorium should the customer’s improved circumstances merit such action.
  4. Banks will, at the time of arranging the extension,  assess and discuss with customers the options for restructuring the loan at the end of the moratorium, especially treatment of the accumulated interest.
  5. Households whose income has been negatively impacted will be treated on a case by case basis.
  6. All business owners whose income has been negatively impacted will be treated on a case by case basis.

Customers in need of this support programme are encouraged to contact their financial institution directly for more information, as processes may differ. Queeley said recently that they have been proactive to monitor the situation with customers and to initiate contact if there are concerns about their ability to meet their loan commitments.