By Derek Fernandez
The statement by the finance minister, as reported in the media, stating that the government does not have the legal power to dictate to banks to impose a moratorium on loan repayments needs clarification.
Presently, the country is under a state of emergency, so any reference to the legal power also must include the relevant Emergency (Essential Powers) Ordinance 2021, which was not passed by Parliament but still can legally be used to override contracts, effectively denying businesses from operating, using or using private property or private hospitals, stopping businesses from sacking staff or restricting movement.
In addition, the government had earlier passed temporary relief via The Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 (Act 829) that has since lapsed, but was then effective in overriding contractual rights (while banks were generally left out from its application, despite most businesses having to follow).
This act stopped the rights of businesses from demanding payments due, insisting on contractual deadlines during the period prescribed. There was no doubt such a law in difficult times was needed but many businesses suffered because of it.
This is in addition to the power of the minister and/or Bank Negara Malaysia under the Financial Services Act 2013 (FSA) to renew a banking licence and/or to impose new conditions for not only renewal, but on existing licences for financial institutions consistent with national interests.
For starters, it is clear the government, through the finance minister, can do the following:
1. Politely tell the banks that the government requires all banks to waive interests or grant a moratorium during a total lockdown or movement control order (MCO) and ask them to agree to this; maybe some of the banks will understand the situation and that social justice requires, in times of national suffering, the economic burden of the people and nation be shared equitably by all in proportion to their ability to bear it.
2. If they don’t voluntarily agree, then the government has the legal power to re-enact the Covid-19 Temporary Measures Act and widen it to cover financial institutions and loan repayments or interests on it.
This can be done immediately and, like in the past, stopped many businesses from collecting monies, due or postponed contractual deadlines without substantial consequence.
3. In addition, the government can enlarge the powers of the Emergency (Essential Powers) Ordinance 2021 to achieve the desired result but that may be unnecessary because there are other ways for the matter to be resolved, but these powers still exist.
4. Of course, administratively, the Finance Ministry, which has the power to approve banking licences under Section 10 of the FSA, and Bank Negara for approvals under S11 of the FSA, including the renewals and conditions, can tell those financial institutions that do not wish to cooperate with the government during a time of national crisis despite making record profits, that the government will take that into account in deciding whether to renew or give further approvals later. Both sections allow Bank Negara or the minister to take into account any matter they feel relevant.
Emergency measures during a time of national suffering whose burden is being felt and borne by the public and businesses substantially will logically be such a relevant matter.
5. Section 11 and Section 13 of the FSA allows national policy considerations to be taken into account in deciding to approve, grant or renew a licence to a financial institution or any relevant approval.
Section 13 of the FSA allows the minister or Bank Negara (in the case of an approval under Section 11) to impose any new conditions on any existing financial institutions.
Section 13 of the FSA states:
The minister upon recommendation of bank (Bank Negara), in the case of a licence granted under Section 10 or Bank Negara under Section 11 may at any time in writing amend or revoke any existing condition of an authorisation or impose any new conditions thereto...”
So, in essence, there is tremendous power to get banks to voluntarily agree to an interest waiver or moratorium and, if not, legally require or administratively force them to do so if there really is the political will to want the financial burden of Covid-19 to be shared by all, especially those who are actually still able to make big profits despite the Covid-19 situation.
It is not unnoticed that even some of the recent exemptions given to property developers from liquidated ascertained damages (LAD) because of MCOs has not translated to relief from buyers paying interest on loans during the LAD period. Buyers still have to pay interest on loans while some developers are exempt from LAD payments to buyers. While it may be fair to exempt LAD, it’s unfair why buyers have to pay interest on loans when developers can get such exemptions. Surely, the most vulnerable must be protected first and that is the home buyer.
All governments have the power to fully control financial institutions because banking and finance is a critical component of national and economic security, and a banking licence is not a legal right but a privilege that comes with conditions the government can and must impose in the national interest.
I hope the government will uphold the cause of social justice for all Malaysians in the equitable bearing of the financial burdens caused by the Covid-19 pandemic.
Presently, the country is under a state of emergency, so any reference to the legal power also must include the relevant Emergency (Essential Powers) Ordinance 2021, which was not passed by Parliament but still can legally be used to override contracts, effectively denying businesses from operating, using or using private property or private hospitals, stopping businesses from sacking staff or restricting movement.
In addition, the government had earlier passed temporary relief via The Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 (Act 829) that has since lapsed, but was then effective in overriding contractual rights (while banks were generally left out from its application, despite most businesses having to follow).
This act stopped the rights of businesses from demanding payments due, insisting on contractual deadlines during the period prescribed. There was no doubt such a law in difficult times was needed but many businesses suffered because of it.
This is in addition to the power of the minister and/or Bank Negara Malaysia under the Financial Services Act 2013 (FSA) to renew a banking licence and/or to impose new conditions for not only renewal, but on existing licences for financial institutions consistent with national interests.
For starters, it is clear the government, through the finance minister, can do the following:
1. Politely tell the banks that the government requires all banks to waive interests or grant a moratorium during a total lockdown or movement control order (MCO) and ask them to agree to this; maybe some of the banks will understand the situation and that social justice requires, in times of national suffering, the economic burden of the people and nation be shared equitably by all in proportion to their ability to bear it.
2. If they don’t voluntarily agree, then the government has the legal power to re-enact the Covid-19 Temporary Measures Act and widen it to cover financial institutions and loan repayments or interests on it.
This can be done immediately and, like in the past, stopped many businesses from collecting monies, due or postponed contractual deadlines without substantial consequence.
3. In addition, the government can enlarge the powers of the Emergency (Essential Powers) Ordinance 2021 to achieve the desired result but that may be unnecessary because there are other ways for the matter to be resolved, but these powers still exist.
4. Of course, administratively, the Finance Ministry, which has the power to approve banking licences under Section 10 of the FSA, and Bank Negara for approvals under S11 of the FSA, including the renewals and conditions, can tell those financial institutions that do not wish to cooperate with the government during a time of national crisis despite making record profits, that the government will take that into account in deciding whether to renew or give further approvals later. Both sections allow Bank Negara or the minister to take into account any matter they feel relevant.
Emergency measures during a time of national suffering whose burden is being felt and borne by the public and businesses substantially will logically be such a relevant matter.
5. Section 11 and Section 13 of the FSA allows national policy considerations to be taken into account in deciding to approve, grant or renew a licence to a financial institution or any relevant approval.
Section 13 of the FSA allows the minister or Bank Negara (in the case of an approval under Section 11) to impose any new conditions on any existing financial institutions.
Section 13 of the FSA states:
The minister upon recommendation of bank (Bank Negara), in the case of a licence granted under Section 10 or Bank Negara under Section 11 may at any time in writing amend or revoke any existing condition of an authorisation or impose any new conditions thereto...”
So, in essence, there is tremendous power to get banks to voluntarily agree to an interest waiver or moratorium and, if not, legally require or administratively force them to do so if there really is the political will to want the financial burden of Covid-19 to be shared by all, especially those who are actually still able to make big profits despite the Covid-19 situation.
It is not unnoticed that even some of the recent exemptions given to property developers from liquidated ascertained damages (LAD) because of MCOs has not translated to relief from buyers paying interest on loans during the LAD period. Buyers still have to pay interest on loans while some developers are exempt from LAD payments to buyers. While it may be fair to exempt LAD, it’s unfair why buyers have to pay interest on loans when developers can get such exemptions. Surely, the most vulnerable must be protected first and that is the home buyer.
All governments have the power to fully control financial institutions because banking and finance is a critical component of national and economic security, and a banking licence is not a legal right but a privilege that comes with conditions the government can and must impose in the national interest.
I hope the government will uphold the cause of social justice for all Malaysians in the equitable bearing of the financial burdens caused by the Covid-19 pandemic.
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