Bulgarian c-bank ready to consider potential new loan moratorium proposal

Bulgarian c-bank ready to consider potential new loan moratorium proposal

The Bulgarian National Bank (BNB) said that it is ready to consider a potential proposal by local banks to extend the loan repayment moratorium in order to mitigate the impact of the coronavirus crisis on borrowers, taking into account the second wave of the disease that has hit the country.

The central bank decided to follow the revised European Banking Authority (EBA) guidelines on the matter, which will apply until 31 March 2021, the BNB said in a statement on Wednesday.

Based on EBA's revised guidelines and in line with the conditions set by them the BNB again has the legal grounds to consider a potential new project of the Association of Banks in Bulgaria for extending the moratorium on loan repayments in view of the COVID-19 situation, the BNB said.

EBA said on Wednesday it decided to reactivate its guidelines on legislative and non-legislative moratoria, to include additional safeguards against the risk of an undue increase in unrecognised losses on banks’ balance sheet.

"The role of banks to ensure the continued flow of lending to clients remains of utmost importance and with the reactivation of these Guidelines, the EBA recognises the exceptional circumstances of the second COVID-19 wave," the European institution said, adding that the reactivation will ensure that loans, which had previously not benefitted from payment moratoria, can now also benefit from them.

Last month, BNB governor Dimitar Radev said that the central bank was not planning to extend further the loan repayment moratorium but was ready to implement additional measures, if necessary, with most of them related to capital requirements.

In July, the BNB approved the request of the local bank association to extend the application deadline of the loan repayment moratorium until  September 30. Only borrowers who are no more than 90 days past due by March 1 can benefit from the mechanisms, which include a six-month postponement of loan principal and interest payments, a six-month postponement of principal payments only, and a mechanism for revolving loan facilities.

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