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Not a Knight in Shining Armor

Fil C. Sionil

Fil C. Sionil

Most of us, who have been locked-up for close to three months in the four corners of our abode, are enthusiastic to physically report for work next week as authorities are allowing some businesses to open up to perk up domestic activities.

It’s time to churn those engines that took a momentary standstill.

“Some, though, are not excited,” says Roland Avante, president and chief executive officer of Philippine Business Bank (PBB) as we discussed the bank’s operations and the direction of the domestic economy for the remainder of the year while awaiting for the result of the Wednesday meeting of the Metro Manila Council and the Inter Agency Task Force on Emerging Infectious Diseases for the protocol on the semi-opening of business.

But, my deadline, again, got the better of me. I’ve got to do what I need to do and get things going after Malacanang said that the President was the one to make the announcement of the result of the meeting.

The usually guarded optimist, this time Mr. Roland was taking a reserve stance, even a bleak outlook. “This is really bad, I don’t think we’ve seen the worst of COVID-19.”

While medical experts have yet to get the needed elusive vaccine, Mr. Roland shared the thoughts of Nobel Prized economist Paul Krugman that the COVID-19 is the greatest economic pandemic that hit the world economy. Recovery may take two to three years.

Mr. Krugman as quoted by Spencer Bokat-Lindell in his NYT column, described COVID-19 as the greatest economic pandemic that brought the global economy into recession, recovery largely depends its virulence and the vaccine. “An act of God, almost, that forced us to shut down a large part of the economy. If the virus hangs around for a long time that could mean a slow recovery. And if we mishandle this badly enough, we could create structural problems that retard recovery. If the pandemic were to lift in the next couple of months, though, I don’t see any real reason we couldn’t have a quite fast recovery.”

Facts on the ground indicate that some moms and pops, mostly MSMEs and start up SMEs, particularly those brick-and-mortar, are seriously considering closing shops as shopping now has shifted to the new norm – online. This could build-up non-performing loans and non-performing assets of banks.

Since the start of the pandemic, banks have collaborated with stakeholders and policy makers to enact regulatory relief measures. Banks have also adhered to the Bayanihan to Heal as One Act in order to lessen the burden on borrowers who are unable to pay by extending payment due dates and waiving of certain fees. Loan requirements have also been eased to cope with the new normal and boost economic activities.

Surely, the Heal as One Act has given MSMEs and SMEs financial flexibility under ECQ. Still, obligations are obligations. Condonation is not in the picture, though.

As I’ve written last week, a bus firm despite suspending its operations during the entire ECQ period was diligent to meet its monthly amortization to avoid paying any accrued interest.

Lenders have also committed to sustain relief measures throughout the MECQ. Don’t get me wrong here, the banking industry came into the COVID-19 pandemic with strong foundations. It has been able to support the country with the backing of regulatory relief and prudent measures from the Bangko Sentral ng Pilipinas.

While we are still far from it, a worse case scenario that we shouldn’t close our doors to is the possibility of business insolvency. Businesses have employed effective risk management measures while some solely rely on banks to save them.

Banks are strong and resilient but are not immune to the effects of the pandemic. But, it’s a risky proposition for lenders and other financial institutions if the stream of appeals continues flowing like requests for “impractical treatment” like writing-off loans and condonation, to the extreme.

Banks are strong and well capitalized, but they are not the white knight of this pandemic.

Talkback to me at sionil731@gmail.com


Source: Manila Bulletin (https://business.mb.com.ph/2020/05/28/not-a-knight-in-shining-armor/)

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