COVID19 Overview on moratoria

31 March 2020 | newsletters

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

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

Austria

According to draft legislation, a statutory 3 months moratorium is proposed. For loans taken out by consumers and micro enterprises after 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 (they may opt-out) 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)

Yes, a Moratorium on all (re)payments under bank loan agreements for a period of up to 6 months / until the national state of emergency ends, starting with bank approval.

Quasi-voluntary. Banks are obliged to define appropriate measures that will help their clients 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)

Yes, a Moratorium on all (re)payments under bank loan agreements for a period of up to 6 months / until the national state of emergency ends, starting with bank approval.

Quasi-voluntary. Banks are obliged to define appropriate measures that will help their clients 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

Yes, a recent Moratorium law was passed applicable by 13 April 2020 (i) removing the consequences for private law entities/individuals of a delay in payment (e.g. default interest, acceleration, rescission of contract), applicable retroactively 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 or any rule modifying or removing the general conflict of laws and jurisdiction rules for payment obligations in Bulgaria.

Croatia

No statutory measures are yet in place that would defer payments or freeze enforcement by law. However, the Government encourages banks to grant enforcement holidays for a 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

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

(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

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 such policies. 

n/a

n/a

Montenegro

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

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

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

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). Natural persons who do not register overdue payments/whose loan is not accelerated are eligible. For legal persons, the criteria are twofold (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. NB: another couple of draft bills on the same subject are submitted by MPs and are currently being pushed for urgent approval in the Parliament - one of them (making a Moratorium until 31 December 2020 available to any borrower whatsoever, applying also to creditors who are claim collectors and creditors in operational leases and instituting an enforcement moratorium until the end of the year) seems to gain traction and may be passed as early as Friday 3 April 2020.

 

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 (which are expected within 15 days from publication of the Ordinance) will 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.

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.

Serbia

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 (they may opt-out until 30 March 2020) and mandatory for banks, i.e. a borrower is free to invoke the Moratorium and 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

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

Shortly after appointment of the new Slovak government, it was announced that no court execution or public auction may be commenced until 30 April 2020. In addition, Slovak government is currently considering 3 months deferral of instalments for certain businesses (e.g. service providers). This is however still subject to negotiation with the banks. As an offset, the Slovak government is considering deferral of the bank levy. Slovak government holds negotiations on further economic measures on 25 March 2020.

Freeze on enforcement - mandatory
Deferral of payments - for now only planned

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

Turkey

(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 Presidential Decree until 30 April 2020.

Deferral of bank loans is voluntary.

Only local banks are subject to the recommendations of the Banking Regulatory Authority.

 

table last updated on: 03 April 2020

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!