COVID-19 and bank loans payment moratorium

Moratorium on loan repayments was approved by the Bulgarian National Bank on 10 April 2020 in line with the European Banking Authority guidelines (EBA/GL/2020/02) and in order to mitigate the impact of the COVID-19 crisis on borrowers.

1. The proposed mechanisms:

• Mechanism 1 – grace period for payment of interest and principal

  • Grace period for principal and interest up to 6 months not later than 31 December

  • The interest and principal accrued during the grace period shall be repaid according to a new repayment schedule for term up to 6 months longer than the original (depending on the number of deferral installments).

  • To each installment of the repayment schedule, an equal part of the total amount of interest accrued during the grace period shall be added, until the final maturity of the loan or for a reasonably shorter period.

• Mechanism 2 – grace period for payment of principal

  • Principal deferral up to 6 months, but not later than 31 December 2020.

  • The interest due for the period shall be paid according to the original schedule.

  • The principal accrued during the grace period shall be repaid according to a new repayment schedule for term up to 6 months longer than the original (depending on the number of deferral installments).

• Mechanism 3 – applicable for revolving credit products:

  • Revolving of the credit line is allowed, even though due payments or part thereof are not repaid. The payment of installments is deferred for a period up to 6 months but not later than 31 December 2020.

  • No minimum payment for credit card shall be due as from 1 February 2020 for a period up to 6 months and not later than 31 December 2020.

  • The monthly interest payment due for overdrafts shall be repaid from the unutilized overdraft limit or the payment shall be deferred for a period up to 6 months, but not later than 31 December 2020.

2. The measures apply to:

• Loan borrowers, clients of banks (except for credit institutions) that:

  • already have or expect to have difficulties in regularly servicing their loan obligations under the contract signed with the bank, in connection with the COVID-19 pandemic and restrictions introduced by the new Measures and Actions during a State of Emergency Act, introduced by the Parliament on 13 March 2020, and their consequences.

  • Have signed their loan contract before 31 March 2020.

  • Have serviced their loans in a regular manner or with not more than 90 past due, as at 1 March 2020.

Scope of application:

• Loans to individual clients: consumer and mortgage loans, credit cards, overdrafts,finance lease, etc.

• Loans to legal entities: term loans (investment and working capital loans), revolving loans, overdrafts, credit cards, finance lease.

3. What are the deadlines for the applications and how to apply:

• Applications for deferral, according to the moratorium, could be submitted to banks and their subsidiaries not later than 22 June 2020.

• The date of the request for deferral does not change the total deferral period of up to 6 months.

• The deferral request application shall be made:

  • Online – the Banks have published online application forms on their websites/online banking channels;

  • Via bank employees – the banking officer responsible for relationships with the client, at the bank’s offices and/or through a customer service phone number.

• The request may include both overdue installments prior to the application, and regular installments not yet due.

• The rescheduling fee shall be determined separately by each bank.

• The mechanism selection and the rescheduling itself shall be done with the mutual consent of the borrower and the respective banking institution.

• The borrowers have the opportunity to cancel the granted grace period earlier than foreseen and to request the preparation of a new repayment plan.

This material is prepared for informative purposes and shall not be considered as individual advice or consultation. Should questions arise or if you need further information, please do not hesitate to contact us at tel.: 02/943 37 00, fax: 02/943 37 07, е-mail: office@afa.bg or at: 38, Oborishte Str., Sofia 1504.