Payment moratoria in CEE/SEE region

As a result of the coronavirus outbreak, most CEE/SEE countries have introduced similar moratoria provisions to the Hungarian regulations, but there are several countries that have not yet taken this step. With the help of Dr. Gergely Szalóki, Partner at Schönherr Hetényi Law Firm, we provide an overview of the regulation of these regions' countries in respect of moratoria of bank loans.
Közjegyzői tragikomédia: új szintre lép a lakáshitelesek lehúzása

Where decisions have already been made

In the Federation of Bosnia and Herzegovina and the Republic of Serbia a moratorium has been introduced on all (re)payments under bank loan agreements for a period of up to six months or until the national emergency ends, starting with the bank's approval.

In Bulgaria a recent moratorium law was passed applicable from 13 April 2020 - disapplying the consequences for private law entities and individuals of payment delay (e.g. default interest, acceleration, rescission of contract), applicable retrospectively as of 13 March 2020. As a part of said legislation, Bulgaria freezes all court-bailiff enforcements as of 24 March 2020.

In Montenegro and Serbia a moratorium was introduced based on a decision of the Central Bank. Borrowers are entitled to a 90 day moratorium (starting 20 March 2020 and 18 March 2020) on all (re)payments under loan agreements. Banks in these countries may not initiate enforcement procedures either.

Slovenia has also issued the deferral of payments for eligible borrowers of bank debt for period of 12 months starting from the date of the bank's approval. In Turkey, based on the recommendations of the Banking Regulatory Authority, certain state-owned banks have already declared that instalments of corporate loans for the month of March will be postponed in case of demand by the borrower. Also a freeze on enforcement has been enacted by a presidential decree until 30 April 2020.

In these countries, the moratoria have been adopted on a quasi-voluntary basis. The 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. As for the debtors, their engagement is voluntary. However, in Slovenia, a bank which denies a justified application by an eligible borrower risks a considerable penalty of up to EUR 250,000.

Where decisions are currently being made

In 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 freezes for a period of three months starting April 2020. As the emergency package currently stands (i.e. the announcement of measures to be taken), it seems it will be on a voluntary basis only.

In the Czech Republic there is no state-wide statutory moratorium for the time being and no official proposal or draft bill yet. In response to a recommendation of the Czech Banking Association, most banks have already introduced a number of deferral of payments (loan freeze) programs. The majority of Czech banks allow their clients to defer the repayment of their loans, mortgages and leases for up to three months where the debtor's inability to pay is in direct correlation to COVID-19 pandemic. The deferral concerns mostly mortgages and consumer loan payments with a primary focus on employees' and self-employed clients' relief. The deferrals are on a voluntary basis only and currently they rather seem to be a marketing tool rather than a real systemic precaution. However, given that the relief is primarily aimed at small and consumer debtors, we deem it unlikely that cross-border lending would be affected in the near future (unless actual steps for a statutory moratorium are taken).

The Slovak government is currently considering a three month deferral of payments which is subject to negotiations with the banks. As Slovakia has a new government as of 21 March 2020, the current situation is uncertain.

The Polish government is currently planning - unofficially - a general mandatory moratorium on payments and/or a freeze on enforcement. The Polish Banking Association has suggested some decisions to be made by Polish banks (e.g. the suspension of the payment of loans, leasing, factoring, facilitating the contact by electronic means of communication, etc.), however, no actual steps have been taken yet.

In North Macedonia measures regarding deferrals of payments are planned, but officially not yet declared.

Where no such steps have been taken

In Moldova there are no measures with respect to the deferral of payments or a freeze on enforcement. The commercial banks or non-banking payment service providers decide independently whether to apply such policies or not.  In Austria no such measures have been introduced by the government nor the banks.

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

Generally speaking it is only applicable for local banks, however, it cannot be excluded that borrowers might try to invoke the moratorium against both local and cross-border bank creditors.

In Romania the draft law does not distinguish between domestic or foreign lenders (or between financial or non-financial institutions, for that matter). 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 – e.g. to act as an economic safeguard.

In conclusion, most countries in the region have already taken or are planning to take measures to maintain financial liquidity. It is essential in regard to their most affected sectors to prevent market players, - especially small and medium-sized enterprises - from becoming insolvent. If not, this situation could easily lead to chain debts, which have proven very challenging to wind-up in the past.

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