It is the banks’ chance for redemption. Having made the Team Australia pledge, they cannot afford to get this wrong. Their pledge is unqualified: any small business that needs loan help will get it.
By 11pm on Thursday, chief regulator Wayne Byers had given authorisation for the bank deferment on repayments covering more than $100bn of small business loans — applying for six months, as insisted by Scott Morrison.
The initial period had been three months. From the start, the banks signalled they wanted to do something. With Morrison having identified six months as the likely timeline of crisis, this baseline had to be built into the decision involving the government, the banks, the Australian Prudential Regulation Authority and other regulators.
A few days earlier, Josh Frydenberg got approval from Morrison to approach the banks to get loan repayments deferred, given that thousands of small businesses faced collapse or staff retrenchments. The Treasurer saw this as integral to the Team Australia approach he has espoused. The banks agreed with this priority. Each of the Big Four CEOs was on board in talks with Frydenberg.
For the banks, being part of the Team Australia response is indispensable. It now becomes the absolute test of whether their repeated post-royal commission claims about serving the social interest, not just shareholder interests, are genuine.
To this stage, most Australians are merely cynical about the assertion by the banks that they have changed their ways.
This initiative is possible only because the banks are strong and well capitalised. APRA had to be satisfied the decision would not impair the asset and balance sheets of the banks.
Hence, the initial concerns about whether the deferment would be three or six months. That roadblock was resolved by late on Thursday night.
Frydenberg called the decision a “game-changer” and basic to salvaging confidence on the part of small business that employs five million people. Australian Bankers Association chief executive Anna Bligh said the decision could put as much as $8bn back into small business pockets. Implementation will be critical.
Bligh said there would be a fast-track approval. “Small business can rest assured that if they need help, they will get it,” she said.
That’s an unqualified pledge.
Morrison and Frydenberg expect it to be met.
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