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COVID-19: Deferrals of Banking Loans “Second Aid” to Citizens, Firms and Self-Employed Entrepreneurs 

by Simona Halakova

Published: April, 2020

Submission: April, 2020

 



Since the beginning of the SARS-CoV-2 pandemic, the deferrals of loan payments and other payments (such as leasing payments, etc.) have been provided by credit institutions or other financial institutions voluntarily, upon their negotiations with debtors, upon their discretion and within the formal process for approval of deferred payments with a potential future negative effect on the credit score of the debtor.


In parallel, there have been intensive discussions between the representatives of the state, the National Bank of Slovakia, the commercial banks and other financial institutions on adoption of extraordinary measures coordinated with the state and relating to the deferral for such payments during the coronavirus SARS-CoV-2 pandemic.


Below, please see the up-to-date status of such negotiations as publicly communicated by the Government of the Slovak Republic and representatives of Slovak banks.


This contribution was prepared on 3 April 2020 based on then publicly available information. We monitor the situation closely, and will continue to publish updates to the below information.


  1. Deferral of the payments of mortgages and consumer credits provided by the banks

On 3 April 2020, at the official press conference, the Prime Minister of the Slovak Republic, together with the Minister of Finance of the Slovak Republic, and the representatives of the Slovak Banking Association (the “SBA”) (in particular Mr Alexander Resch, president of the SBA and chairman of the board of directors and director general of VÚB banka, a.s.; Mr Peter Krutil, member of the board of the SBA and chairman of the board of directors and director general of Slovenská sporitelna, a.s.; Mr Michal Liday, member of the board of the SBA, chairman of the board of directors and director general of Tatra banka, a.s.) announced that the Government of the Slovak Republic agreed with the SBA on the rules for the deferral of mortgage and consumer credit payments during the coronavirus SARS-CoV-2 pandemic.


According to the information communicated at the press conference of 3 April 2020 and subsequently summarized at the website of the Ministry of Finance of the Slovak Republic as of 3 April 2020, the rules for the deferral of such payments, as newly agreed between the Government of the Slovak Republic and the SBA, should be as follows:


  • Eligible debtors should be natural persons, self-employed individuals and small and medium-sized enterprises (“SMEs”) with up to 250 employees.
  • At the date of receipt of the application for a loan deferral by the bank, the debtor should not be in delay with the payments for more than 30 calendar days. The debtor should not be in delay with the repayments of EUR 100 or more on another loan with the same creditor.
  • The measure should apply to the payments of mortgages and consumer loans provided by the banks. The agreed deferral should not apply to overdraft facilities or credit cards. Also, the deferral does not apply to other creditors than the banks – the alternative measures in relation to these other types of creditors should be negotiated and announced later on.
  • The deferral may be provided for a period of up to nine (9) months. It should be upon the debtor’s discretion how long the deferral period applied for would be and whether the loan payments will be deferred during the whole period of 9 months or during only a part thereof.
  • The deferral should be free of any administrative charge.
  • The deferral constitutes an amendment of the respective mortgage/consumer credit agreement and the deferral will not have any negative impact on the credit score of the debtor (i.e. the deferral shall not be considered as a delay in the repayment of the loan in relation to the credit register).
  • The debtor should have a discretion whether (i) the deferred payments will be postponed to the end of the loan term and thus prolonging the original term by the time of such deferral or (ii) the deferred payments will increase the subsequent instalments/payments after the deferral without prolongation of the original term or (iii) the combination of the two.
  • The deferral should be provided upon a simple request by the debtor via a simple request form, without any documents or attachments needed. The application can be submitted in writing or electronically (e.g. via e-mail and subsequent verification, for example by telephone, scan sent, etc.). The template of the request form should be defined by the law and published by banks on their websites.
  • Such a request may be filed at any time during the period of the pandemic crisis[Note: we expect that the period for filing the deferral applications will be more precisely defined in the law or stated otherwise]provided the conditions for the deferral are met. The time period of deferral is the same regardless the time during the pandemic crisis when the request was filed.
  • If the deferral request meets the conditions stipulated by law, the bank is obliged to allow the deferral of the payments and to inform the debtor accordingly. Otherwise, the bank should ask the debtor to amend or complete the application. At the same time, banks must inform the debtor of any conditions for deferral and the payments that should be made after the deferral. The aim is that the debtor does not believe that there are no obligations or obligations associated with the deferral of the loan and that the deferral of the loan means that the deferred payments do not have to be paid eventually. This information should be delivered to the debtor in writing or electronically.

  1. Deferral of the payments of banking loans for larger companies, banking overdraft facilities, leasing instalments or payments under credit cards and non-banking loans

According to the published media statements of several governmental representatives, including the Prime Minister of the Slovak Republic, and the Chairman of the National Council of the Slovak Republic, as well as, according to the published media statements of the Governor and the Vice-Governor of the National Bank of Slovakia, there are negotiations currently underway between the state and the banking and non-banking sector, as well as leasing companies in order to agree on the conditions for providing deferrals of payments of loans and payments other than mortgages and consumer credits from banks (already agreed). These should include banking loans for larger companies (other than SMEs), banking overdraft facilities, leasing instalments or payments under credit cards, as well as non-banking loans, etc.


Preliminary information suggests that the goal is to enable that the deferral is granted upon request to any debtor who fulfils the conditions to be stated, without the necessity to undergo a formal procedure for approval of such a deferral. The time of deferral could be e.g. in case of leasing payments some 3 months, plus another 3 months in case of further request, thereby counting together up to maximum of 6 months of total deferral. As to the consequences of such deferral on the credit score of a debtor, it is anticipated that such a deferral should not negatively affect the credit score, similarly as in case of deferral of banking loans already agreed.


 



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