COVID19 Overview on moratoria

15 October 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
(last updated on 15 October 2020)

Statutory Moratorium on repayment of loans taken out by consumers and micro enterprises (enterprises with less than 10 employees and annual turnover/annual balance sheet not more than EUR 2 million) before 15 March 2020, resulting in extension of payment dates falling between 1 April 2020 and 31 January 2021, by 10 months.

During the Moratorium there is a ban on termination of loans due to delay in payment or material deterioration in financial circumstances.

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 a result of COVID-19. 

 

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

 

Bosnia (FBiH)
(last 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)
(last 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
(last 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
(last checked/updated on 7 May 2020)

Yes, a recent Moratorium law was passed applicable as of 1 May 2020 according to which all pending enforcement proceedings (save for certain cases) are suspended for a three-month period. The Moratorium may be prolonged for another three months. Banks are still encouraged to grant deferment of payments on a voluntary basis. The Moratorium is imposed by law and the suspension of enforcement proceedings is mandatory (save for certain cases against natural persons).

 

The suspension of enforcement proceedings affects all creditors.

Czech Republic
(last checked/updated on 21 April 2020)

The Act on Certain Loan Repayment Measures in Connection with the COVID-19 Pandemic entered into force on 16 April 2020 introducing an opt-in moratorium for both individual and corporate borrowers, which enables to defer the repayments for three or six months. The borrower needs 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 is available for borrowers whose loans are overdue more than 30 days as at 26 March 2020. Should the borrower choose to defer the repayment, the maturity period would be adequately extended at the end of the loan´s life. Consumers and self-employed have to pay the interest in a reduced amount during the deferral period as opposed to corporate borrowers that have to pay the whole interest as agreed in the loan documentation.

Besides the above-mentioned, majority of 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.

The moratorium is on an opt-in basis and as such, it is only mandatory if the borrower actively claims its right under the new Act by notifying its creditor(s). The opt-in regime applies to both citizens and corporate borrowers. Conversely, those borrowers that wish to continue in their regular repayment schedules are entitled to do so with no special activity required.

Besides the statutory moratorium, 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 borrower's inability to pay is in direct correlation to COVID-19 pandemic.

The territorial scope of the Act is not explicitly addressed, nevertheless, the explanatory report to the Act assumes that the Act would have an impact on all loans provided in the territory of the Czech Republic regardless of whether the creditor or the borrower is of Czech or foreign origin and regardless of the law applicable to the loan from the perspective of private international law.  Based on this, it can be assumed that the Act should also cover various scenarios with a cross-border element, e.g.: 

- Czech borrower with a foreign creditor (also should be valid in situations where there are more parties on each side);
- Foreign borrower and a Czech creditor (the same applies as in the bracket above) if the purpose of the loan is realized in the territory of the Czech Republic (such as an acquisition target located in the Czech Republic);
- A mix of Czech and foreign borrowers and a foreign creditor whereas it seems likely that only Czech borrowers would be covered by the moratorium (which may cause various consequences for syndicated financing deals, including the occurrence of default caused by opt-in for the moratorium).
 
Nevertheless, this matter is not regulated explicitly in the Act and the above interpretation is uncertain. We, therefore, recommend to borrowers rather careful negotiation in good faith with the respective creditors than strictly insisting on the above interpretation at least not before further clarification is provided from the legislator or the court.

Hungary
(last 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
(last checked/updated on 28 April 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
(last 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
(last 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
(last 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
(last checked/updated on 27 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. 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 (ii) the entity is not subject to insolvency. On 3 April 2020, the Parliament passed Law No. 180/2020 on the same subject matter, but providing for a more relaxed regime. However, this legislative initiative is currently being challenged in front of the Constitutional Court. On 23 April 2020, the Parliament passed yet another law approving the Ordinance (the "Law") with certain alterations. Under the Law, borrowers with overdue payments can still benefit from the Moratorium. Moreover, borrowers, with the exception of natural persons, only have to prove that their activity was curtailed (in full or in part) or that their incomes dropped by 15% compared to the average of the last two months in order to benefit from the Moratorium. It is likely that this Law will also be challenged in front of the Constitutional Court.

 

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 capitalised 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 capitalised, 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, interest and other expenses will not be capitalised during the suspension period; there is no exception for consumer mortgage loans, the State does not guarantee the payment of interest for such loans and the Law does not establish a 45-days term for the borrower to submit a request with its lender requesting 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
(last checked/updated on 29 July 2020)

After the first Moratorium expired in June 2020, the National Bank of Serbia (NBS) introduced an additional Moratorium. Debtors are now allowed another deferral in the repayment of liabilities to banks and financial leasing providers becoming due in the period from 1 August 2020 to 30 September 2020, as well as liabilities that became due this July. During the moratorium, banks / financial leasing providers may not commence enforcement proceedings and other debt collection actions against the debtors. The Moratorium applies to liabilities based on loans and credit products of the bank (including overdrafts and credit cards), as well as other banking products (including credit linked interest rate hedging instruments and bank guarantees). The deferral of payments is voluntary for borrowers (opt-out until 10 August 2020) and mandatory for banks / financial leasing providers which are obliged to offer this new deferral to individuals, farmers, entrepreneurs and companies by 31 July 2020. If a debtor does not reject the offer until 10 August 2020), it shall be deemed that she/he/it has accepted the offer. The debtor may call off the deferral anytime by a request to the bank or by mere payment in full of its due and outstanding liabilities.  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
(last 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
(last updated on 30 April 2020)

On 12 May 2020, an amendment of the Covid Act will enter into force, which provides for a temporary protection from bankruptcy and enforcement proceedings (bankruptcy and enforcement moratorium). Such protection is not automatic, an application of the debtor with a competent court is required. In order to be granted the protection, the debtor has to fulfill the statutory conditions, which are – in our opinion – fairly easy to fulfill for companies that were in healthy condition before the outbreak (e.g. debtor was not insolvent as of the same day). 
Bankruptcy and enforcement moratorium (if granted by the court) provides for specific protection of the debtor, inter alia; (i) suspension of the proceedings on proposal of creditor on bankruptcy of debtor until proceedings until 1 October 2020; (ii) suspension of enforcement proceedings which has commenced after 12 March 2020 in order to satisfy claims from business activities of the debtor; and (iii) enforcement proceedings in relation to enterprise, etc. 
Bankruptcy moratorium terminates (i) as of 1 October 2020, or (ii) upon application of the debtor, or (iii) upon decision of the court. The Slovak government may prolong moratoriums until 31 December 2020. 

Slovak Covid Act also 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 31 May 2020. 

On 7 April 2020 a 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. 

Slovak law also provides for a possibility of the natural persons to request 3 month deferral of leasing payments (with a possibility to request 3 additional months). Conditions are similar as for the loans provided by banks, however apply only to the consumer loans and financial leasings provided by leasing companies (not to operative leasing).

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 are also expected. 
 
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.

Bankruptcy and enforcement moratorium - upon request of the debtor and court approval
Deferral of payments - mandatory
Bankruptcy and enforcement moratorium - both local banks and creditors that lend cross-border
Deferral of payments - local banks

Turkey
(last 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, Henri Bellando
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!