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LETS GET DOWN TO BUSINESS.

Question :
Are the banks actually helping

The current situation which we are ALL in together is requiring a strategy to put safety first. This in turn is calling most businesses to make a huge sacrifice to stay alive and thus keep our loyal employees employed. This percentage or measure of sacrifice needs to be across the board. Including banks, now from where I sit banks are putting a narrative out there that they are offering help eg: mortgage holidays however this appears to not meet the measure by which everyone else is giving. Leases, Mortgages, Rents, Loans etc all are significant costs that are still on the table when revenues aren’t. Could someone advise me why it appears that banks aren’t helping, could they do more, is it time we start a nation wide campaign to get attention? However I would like an argument from the otherside as I’m not an economist and would this in fact cause us all more trouble if banks were to in fact lend a hand? …My argument is the sacrifice needs to be across the board and a measure by all.

Question submitted 30/03/20 @ 04:26pm
Industry: Funding & Finance
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  • You’ve raised some good points and I hope this provokes some really interesting discussion Scott. It was something I was pondering last week. I also have a limited grasp on microeconomics (so I’m looking forward to reading your responses), but it seems to me that by deferring mortgage payments, banks will be create more wealth for themselves with the extension of loan terms and therefore increased interest payments in the long run. So they are on a no-lose strategy here?
    We’re all experiencing the domino effect that Covid is having on business; projects postponed and cancelled, companies hanging on to their cash instead of paying their bills leading to leases not being paid,etc – how about a positive/alternative set of dominoes lined up along side it starting with banks? What could they contribute as a caring and responsible corporate (which may lead to less or no profit) that looks after their customers, community and country they are operating in?

    I would support a campaign to get a national conversation started. Good luck!

    Scott

    The banks are definitely helping!
    Completely understand where you are coming from and that as business owners, we are making huge sacrifices to stay operational, notwithstanding the fact that holding on to your loyal employees while having to navigate the current situation only compounds things.
    I have personally spoken to senior bank employees at all the main banks and they are currently working out what their internal processes will be in terms of how this will be executed by their frontline bankers.
    Each bank is at a different stage re-interpretation and execution.

    I’d be more than happy to connect you to a senior banker at your bank that could help you with your requirements. Ping me on harry@vegalend.co.nz and I’ll intro you

    Justin, you are correct re mortgage holidays

    Bank’s will allow you to take a break of up to 6 months on your mortgage repayments, however what you will need to understand is the long-term impact on your home loan. The banks will accumulate your interests repayments and then add this to your home loan balance. This means you end up paying interest on interest in the long term. While this will certainly help in the short term, it will most certainly increase your mortgage pain in the long term.

    Given the government will underwrite 80% of individual bank loans to eligible SMEs. Banks will underwrite the remaining 20%. So, in the event of a loan default, 80% of the losses will be borne by Government and 20% will be borne by banks. The scheme sees the Government take a large portion of risk-off banks to encourage them to keep lending. Banks will continue using their own lending criteria when lending to SMEs. This won’t be dictated by the Government.

    OK Scott – here is an interesting question, and what you have raised is something we are all thinking about when our revenues disappear. What is fair? How does fairness align to the law of contract? Do we think it is fair that Banks have different terms of trade to landlords? Many tenants are cancelling their APs to their landlords because of the ’emergency clause’ because many of them can’t earn income from their premises. Should there be a similar provision for banks, for utility companies? Who will and will not game this system?

    My own personal view is that if we all drop to legality, we all drop to the lowest common denominator, we have contagion, we have true chaos. It does not work. What we need to do is shift from reactive to proactive, we need everyone to give, that means everyone – that means banks, that means utility companies, that means owners, that means the government, that means employees, that means investors and if we can all do that proactively we have a chance of getting through.

    I think like others say, everyone is trying to work out how to get through – but if you have a CFO, a CEO, a CMO and a board – you can share the load – but if you are an owner of a small business it can be impossible – so we just need to help each and apply pressure.

    I know some utility companies are offering delayed payment, and holidays – good on them, that is very kind. I know also banks are giving terms if you approach them – but here’s the thing, if we all picked up the phone and asked for help – they could not help, so the large organisations need to get way more proactive, and automated to help us, help each other get through.

    Everyone needs to take a hair cut – period.

    And I got carried away – is it ‘right and fair’ that a landlord is not able to charge any rent to its tenants in this time, but a bank can just accrue the interest because its terms and conditions don’t have the same clause? No it is not fair and equitable. As a former lawyer, I get the law, but I also know understand the philosophy of fairness and justice – do we rely on contractual law when we have contagion. Do we have to rely on Government to change the law in future? Sure, but what about the thousands of jobs, businesses that will fall over right now – we have to stop and find a way forward, everyone gives and we get through.

    Hi Andy
    I wish it were true that we all helped each other and shared the pain. But if you have been a lawyer then you must know that when the shizzle hits the fan it is usually every man for himself. The party who holds the cash, or withholds it, is in the box seat and the other party has to litigate, taking years.
    As far as I can see the banks to doing everything they can be reasonably expected to. By extending moratoriums and making new loans they are increasing their credit risk and it will come home to roost. The banks have shareholders and they are mum and dads in kiwi saver etc.
    So are we asking those mum and dads many of whom will have lost their jobs to take more losses.?
    IMO we are still in panic mode, and we need to focus on getting back to work asap. That is the only solution to all this. Let’s make sure the govt hears this,

    Speaking of BNZ – At this time yes and no. I applied to refinance a business credit card to a business loan. The application was approved but has not progressed any further at this time. This is due to their requirements around a witness for the forms. Apparently they have a lot of applications in this situation.

    Michael @its-internet-services we had the same issue with signing and they have agreed to accept ecosighn/digi-sign – so we worked it that way – Andy

    Micheal, BNZ is now accepting digitally signed docs. I’d circle back to them as they processed a handful for some of our clients yesterday
    Cheers
    Harry

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