COVID19 Overview on moratoria

08 April 2020 | newsletters

Readers should be aware that EBA issued guidelines designed to clarify (among others) when a moratorium measure (private or public) does not automatically trigger the re-classification of exposures as forborne. Criteria include (i) moratorium was passed in response of the COVID19 pandemic, (ii) measure is broadly applied by institutions in that jurisdiction, (iii) measure is available to a broad range of obligors, (iv) the moratorium offers same measures to classes of obligors, (v) the measure only affects the schedule of payments (eg no change in the interest rate beyond usual changes of benchmark rates) and (vi) the moratorium does not apply to new loans granted after the entry into force of the measure (the use of existing credit lines or renewal of revolving loans is not considered a new loan). The institutions are required to continue to assess the unlikeliness to pay by an obligor during and after the moratorium.

Country

Are measures that provide for (1) a deferral of payments and/or (2) a freeze on enforcement (each, a "Moratorium") in place / planned?

Is Moratorium (quasi-) voluntary or imposed by an authority / regulator?

Does Moratorium apply to local creditors only or does it also affect creditors that lend cross-border?

Austria
(latest checked/updated on 6 April 2020)

According to draft legislation, a statutory 3 months moratorium is proposed. For loans taken out by consumers and micro enterprises before 15 March 2020, payment dates falling in the months of April, May or June are (and the final maturity is) extended by 3 months.

The Moratorium is voluntary for borrowers and mandatory for banks, i.e. a borrower has the right to invoke the moratorium if its ability to repay is materially adversely affected (as described more closely in the draft law) as a result of COVID-19. 

Not expressly spelled out but arguably it applies also to foreign lenders if the loan agreement is governed by Austrian law.

Bosnia (FBiH)
(latest checked/updated on 8 April 2020)

Yes, a Moratorium on all (re)payments under bank loan agreements as a single measure for a period of 90 days / until national emergency ends, starting with approval by bank, and for a period of 6 months when combined with other measures.  Quasi-voluntary. Banks are obliged to define appropriate measures that will help their clients financially affected by the pandemic to establish a sustainable business model and to settle credit obligations; the Moratorium is one of the available measures. Voluntary for borrowers. Presumably applicable to non-bank borrowers only (no mention about banks as borrowers in the law). Local banks only; however, it cannot be excluded that borrowers might try to invoke the Moratorium against both local and cross-border bank creditors.

Bosnia (RS)
(latest checked/updated on 8 April 2020)

Yes, a Moratorium on all (re)payments under bank loan agreements as a single measure until national emergency ends, starting with approval by bank, and for period of up to 6 months when combined with other measures. Quasi-voluntary. Banks are obliged to define appropriate measures that will help their clients financially affected by the pandemic to establish a sustainable business model and to settle credit obligations; the Moratorium is one of the available measures. Voluntary for borrowers. Presumably applicable to non-bank borrowers only (no mention about banks as borrowers in the law). Local banks only; however, it cannot be excluded that borrowers might try to invoke the Moratorium against both local and cross-border bank creditors.

Bulgaria
(latest checked/updated on 24 March 2020)

Yes, a recent Moratorium law was passed applicable by 13 April 2020 (i) disapplying the consequences for private law entities/individuals of payment delay (eg default interest, acceleration, rescission of contract), applicable retrospectivelly as of 13 March 2020 and (ii) freezing all court-bailiff enforcements as of 24 March 2020.

The Moratorium does not prevent debtors from performing their (other) payment obligations, so the latter continue to be payable.

There are no special rules for the Bulgarian Moratorium in a cross-border scenario, nor any  rule modifying or disapplying the general conflict of laws and jurisdiction rules for payment obligations in Bulgaria.

Croatia
(latest checked/updated on 7 April 2020)

No statutory measures are yet in place that would defer payments or freeze enforcement by law. However, Government encourages banks to grant enforcement holidays for period of 3 months starting April 2020.

As the emergency package currently stands (i.e. the announcements of measures to be taken), it seems it will be on a voluntary basis only. Presumably applicable to non-bank borrowers only (no mention about banks as borrowers in the law).

Local banks only.

Czech Republic
(latest checked/updated on 2 April 2020)

No state-wide statutory Moratorium in effect yet, but see below.

A draft bill has been approved by the government on Wednesday (1st April). Subject to the approval of the Parliament and after its entry into force, both individual and corporate debtors would be able to defer their repayments for three or six months. The debtor would need to notify the creditor and declare that the reason is the negative economic impact of the coronavirus pandemic (no proof required). This option would be available for consumer and business loans including mortgages that were concluded before 26 March 2020 but drawn down after this date. The moratorium would not apply to credit cards, overdrafts, revolving loans, operating leases or loans related to capital market transactions. No deferral available for debtors whose loans are overdue more than 30 days as at 26 March 2020. Should the debtor choose to defer the repayment, the maturity period would be adequately extended at the end of the loan´s life. Consumers and self-employed would not have to pay the interest throughout the entire deferral period whereas the interest would be paid later at the contractual amount. A limit on the maximum amount of interest rates in case of consumer loans would be imposed.

Besides the above-mentioned, most banks already introduced a number of voluntary deferral of payments (loan freeze) programs. To motivate the commercial banks, the CNB relaxed its attitude towards the rules on the qualification of the commercial bank's receivables. A deferred receivable does not automatically deteriorate to classified or ineffective class albeit this would happen under standard circumstances.

Subject to the approval of the Parliament, the moratorium would be mandatory, but it should not apply automatically. Both citizens and corporate debtors would have a possibility to opt-in to the moratorium by notifying their respective creditors. Conversely, those debtors that would wish to continue in their regular repayment schedules would be entitled to do so with no special activity required.

Currently, the majority of Czech banks allowed their clients to defer the repayment of their loans, mortgages and leases, ranging between three to six months, where the debtor's inability to pay is in direct correlation to COVID-19 pandemic. Despite the approach differences from bank to bank, the deferral concerns mostly mortgages and consumer loan payments with a primary focus on employees' and self-employed clients' relief, corporate clients are encouraged to ask for individual approach which can differ from bank to bank.

We believe that the moratorium would apply to the Czech creditors only, however, it is not entirely evident from the declared scope of the draft bill. Furthermore, the wording thereof might be subject to change in the near future.

Hungary
(latest updated on 31 March 2020)

(1) In a governmental decree a moratorium has been introduced under all retail and corporate financings. Capital, interest and fee payment obligations under all loan, credit,  financial leasing agreements, employmer loans and guarantees are suspended until 31 December 2020. (2) Auctions, onsite enforcement procedures and measures cannot be taken until the end of the state of emergency.

(1) Deferral of payments: The moratorium is voluntary for borrowers (opt-out) and mandatory for banks, i.e. debtors may  continue performing their contractual obligations if they would like to. (2) Freeze on enforcements: mandatory

(1) Deferral of payments: The governmental decree does not distinguish between domestic or foreign lenders providing financial services. Foreign lenders might be affected as well (irrespective of the law governing their agreement with the borrower), if we were to consider the rationale of the proposed moratorium - eg to act as an economic safeguard. (2) Freeze on enforcements apply to both local banks and cross-border creditors

Moldova
(latest checked/updated on 31 March 2020)

No measures with respect to the deferral of payments or a freeze on enforcement are in place or being discussed in Moldova. The commercial banks or non-banking payment service providers decide independently whether to apply or not such policies. 

n/a

n/a

Montenegro
(latest checked/updated on 31 March 2020)

A Moratorium based on decision of the Central Bank of Montenegro. Borrowers are entitled to a 90 days Moratorium (starting 20 March 2020) on all (re)payments under loan agreements. Banks may not initiate enforcement procedures.

The Moratorium is voluntary for borrowers  and mandatory for banks, i.e. a borrower is free to invoke the Moratorium and the bank is bound by the borrower's choice. According to an unofficial confirmation by the central bank, the Moratorium should also apply to bank borrowers.

Local banks only (according to an unofficial confirmation from the central bank); however, it cannot be excluded that borrowers might try to invoke the Moratorium against both local and cross-border bank creditors.

North Macedonia
(latest checked/updated on 31 March 2020)

Macedonian authorities adopted a measure according to which Macedonian banks are obliged to offer and/or review offers made to them by debtors (natural persons and non-financial corporates) in relation to terms and conditions of credit arrangements.

The measure does not specify what the offer must consist of (nor whether the offer must include moratorium on debt payments).

Banks are provided with relief from credit risk rules envisaged under the Decision on Methodology and Management of Credit Risk in regards to credit arrangements which are subject to the offer.

The moratorium is voluntary, given that it may be offered but the banks are not obliged to offer it.

It may be understood that the measures relate only to local banks as the measures provide for regulatory relief which is applicable only for local banks. However, it cannot be excluded that borrowers might try to offer/request offers from cross-border bank creditors in relation to terms and conditions of their respective credit arrangements.

Poland
(latest checked/updated on 6 April 2020)

Currently there are no official plans of Polish government to introduce a general mandatory deferral of payments and/or freeze of enforcement.
The Polish Banking Association has suggested some steps to be taken by  Polish banks (e.g. the suspension of the payment of loans, leasing, factoring, facilitating the contact by the electronic means of communication, etc.); however, these are voluntary.

n/a

n/a

Romania
(latest checked/updated on 8 April 2020)

An emergency ordinance was passed on 26 March 2020 by the Government (the "Ordinance"), instituting a Moratorium of up to 9 months, available to virtually any type of borrower affected directly or indirectly by the COVID19 context (except for credit institutions), who do not register overdue payments/whose loan is not accelerated are eligible. For legal persons, there are two additional criteria to be met: (i) the entity's activity was curtailed (in full or in part) further to measures taken by competent authorities during the state of emergency or its March 2020 revenue has decreased by 25% or more compared with the average income generated in January and February 2020, and the entity has obtained a state of emergency certificate  and (ii) the entity is not subject to insolvency, as evidenced by the commercial registry online database. On 3 April 2020, the Parliament passed Law no. 180/2020 (the ”Law”) approaching the same subject matter and also instituting a Moratorium of up to 9 months, however with a more relaxed regime. Under the Law, debtors (except natural persons) only have to provide a statement showing that their income has decreased by at least 15% in the current month compared to the average of the last two months. Moreover, under the Law, all enforcement procedures are also suspended. It is still unclear whether the Law (which is currently being challenged in front of the Constitutional Court) is meant to repeal the Ordinance and/or how the two legal enactments are to work together.

Under the Ordinance, the Moratorium is voluntary for eligible borrowers (opt-in), who will have to submit a request with their lender within 45 days as of publication of the Ordinance (which occurred on 30 March). Application norms detail the processing of such requests by lenders. Interest will accrue and be capitalized during the suspension period, to be repaid in equal instalments for the entire duration of the loan, after the Moratorium ceases. By way of exception, interest accruing on consumer mortgage loans will not be capitalized, but will be repaid in 60 equal monthly instalments, after the Moratorium ceases. The state also guarantees payment of interest on such mortgage loans via guarantees issued based on bilateral conventions entered into with the lenders. Under the Law there is no 45 days period for the borrower to submit a request with the lender and interest will not be capitalized during the Moratorium.

The Ordinance is silent on this topic, but arguments can be raised in support of both options (ie that the Moratorium applies exclusively to local creditors or also to cross-border creditors). In practice, one might expect Romanian courts to extend protection to any eligible Romanian borrower even if the lender is foreign. The Law does not bring any clarity on the subject either.

Serbia
(latest checked/updated on 7 April 2020)

A Moratorium is in place based on decision of the National Bank of Serbia. Borrowers are entitled to a 90 days (for the duration of the national emergency) Moratorium on all (re)payments under loan agreements. Banks may not initiate enforcement procedures. The Moratorium is voluntary for borrowers (opt-out until 30 March 2020) and mandatory for banks, i.e. if a borrower did not opt-out from the Moratorium, the bank is bound by the borrower's choice. Presumably applicable to non-bank borrowers only (no mention about banks as borrowers in the law). Local banks only; however, it cannot be excluded that borrowers might try to invoke the Moratorium against both local and cross-border bank creditors.

Slovenia
(latest checked/updated on 7 April 2020)

Yes. Deferral of payments for eligible borrowers of bank debt (not automatic) for period of 12 months starting with approval by bank.

Quasi-voluntary. A bank which denies a justified application by an eligible borrower risks a considerable penalty (up to EUR 250,000). Presumably, the Moratorium does not apply to bank borrowers (although it has to be said that the law is no sufficiently clear).

Local banks (and local branches of EU banks) only.

Slovakia
(latest updated on 7 April 2020)

On 27 April 2020, new law became effective which provides that auctioneer, public executor and / or trustee must refrain from any competition process leading to the sale of the property (including public auction) of debtor until 30 April 2020. 

On 7 April 2020 a new law entered into force pursuant to which natural persons, self-employed persons, small and medium-sized businesses (max 250 employees) (the "Clients") may request:
-    up to 9 months deferral of instalments of loans provided by banks; and
-    up to 3 months deferral of instalments (with a possibility to request 3 additional months) of loans provided by other companies providing loans to the Clients as a subject matter of business (e.g. consumer loans providers without a banking license.
Such a deferral due to COVID19 outbreak must be provided by the bank or other company providing loans to the Clients as a subject matter of business to each Client upon written application prescribed by law, with the only conditions being that the Client must not be (i) in delay in repaying the loan for more than 30 calendar days as of the date of receipt of the application or (ii) as of 29 February 2020 was not in delay with an amount of at least EUR 100 with respect to another loan with the same bank / company, (iii) in default, i.e. the bank considers the Client to be unlikely to pay or the Client is otherwise in default within the meaning of Article 178 of the Capital Requirements Regulation. 

On 7 April 2020, the Slovak government has also agreed with the representatives of Slovak Association of leasing companies that the natural persons will be entitled to request 3 month deferral of leasing payments (with a possibility to request 3 additional months). Conditions shall be similar as for the loans provided by banks.
Corresponding law should be approved by the parliament in the upcoming days.

Further negotiations in relation to corporate loans of big businesses with Slovak banking sector and leasing payments of legal persons with Slovak Association of leasing companies will be held in the upcoming days. 
 
The Slovak government has also discussed deferral of the bank levy with the representatives of the Slovak banking sector, however final decision has not been reached yet.

 

Freeze on enforcement - mandatory
Deferral of payments - mandatory
Freeze on enforcement - both local banks and creditors that lend cross-border
Deferral of payments - as planned now only local banks

Turkey
(latest checked/updated on 23 March 2020)

(i) Recommendation by Banking Regulatory Authority. Certain state owned banks have already declared that March installments of corporate loans will be postponed in case of demand by the borrower.
(ii) A freeze of enforcement is enacted by the Presidential Decree until 30/04/2020.

Deferral of bank loans is voluntary

Only local banks are subject to recommendation of Banking Regulatory Authority.

 

Authors per country:
Austria – Martin Ebner
Bosnia – Minela Sehovic
Bulgaria – Tsvetan Krumov
Czech Republic – Ondřej Havlíček
Croatia – Ozren Kobsa
Hungary – Gergely Szaloki
Montenegro – Petar Vucinic
North Macedonia – Jovan Barovic
Poland – Martin Antczak
Romania – Adina Damaschin
Serbia – Petar Kojdic
Slovenia – Vid Kobe
Slovakia – Alexandra Adamickova
Turkey – Levent Celepci

 

This article is part of our coronavirus-focused legal updates – visit our coronavirus infocorner to get more info!

Martin Ebner

Partner

T: +43 1 534 37 50193
m.ebner@schoenherr.eu

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Vid Kobe

Local Partner in cooperation with Schoenherr

T: +386 1 200 09 34
v.kobe@schoenherr.eu

Ozren Kobsa*

Attorney at Law in cooperation with Schoenherr

T: +385 1 4579 916

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Tsvetan Krumov

Attorney at Law

T: +359 2 93310 90
t.krumov@schoenherr.eu

Gergely Szalóki

Local Partner

T: +36 1 8700 690
g.szaloki@schoenherr.eu

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Levent Çelepçi

Partner

T: +90 212 230 17 00
l.celepci@schoenherr.eu

Ondřej Havlíček

Attorney at Law

T: +420 225 996 500
o.havlicek@schoenherr.eu

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