We have previously written about payment moratoria granted by Irish lenders in response to COVID-19-the article can be accessed here.
The European Banking Authority (EBA) guidelines which applied to payment moratoria generally and introduced early in the COVID-19 pandemic were phased out as from 30th September 2020. Payment breaks and extensions offered by banks and other regulated entities after 30th September 2020 are now being provided on a case-by-case basis and without the beneficial treatment from a credit and capital perspective under those previous guidelines.
Whilst Ireland, which entered into Level 5 restrictions earlier than many other European countries imposed new restrictions and lockdowns, appears (on current recent reports) to be seeing the benefits of its strategy to ameliorate the second wave the same cannot (at time of writing) yet be said for other European countries.
At a hearing attended by Frances Fitzgerald MEP at the end of October, Andrea Enria (Chair of the European Central Bank’s Supervisory Board) noted in the context of the second wave and concerns raised as to the effect of new restrictions and lockdowns on mortgage holders and businesses, that payment breaks may return. He stated that “if there was significant deterioration of the situation, they [the EBA] stand ready to review their initial decision and that’s a point that might need to be considered in the coming weeks and months”.
The recent improvement in case rates in Ireland and the positive reporting around expected vaccine efficacy, whilst hopefully a light at the end of the tunnel, must be assessed in the light of increasing restrictions across Europe and the timeline for any vaccine. It would seem that the EBA is considering the possibility that general payment moratoria (or other similar measures) may need to be re-introduced if the effects of the measures taken in respect of the second wave create similar difficulties for borrowers as in the earlier part of the year.
As restrictions increase across Europe, lenders planning a strategy around requests from their borrowers for payment forbearance or other accommodation should bear in mind that their case-by-case approach and treatment of borrowers may need to adapt to any new EBA and Central Bank guidance.
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About the Author
Tim is a senior associate solicitor in the Banking and Financial Services team at Hayes solicitors. Tim has extensive experience advising both borrowers and lenders across a wide range of financing transactions including corporate debt facilities, complex cross-border financings, export-credit backed lending and leveraged/acquisition finance.