Breaking News
Investing Pro 0
💎 Reveal Undervalued Stocks Hiding in Any Market Get Started

EU banking watchdog sets out relief for virus-hit loans

Stock Markets Apr 02, 2020 02:05PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
2/2 © Reuters. The spread of the coronavirus disease (COVID-19) in Frankfurt 2/2

By Huw Jones

LONDON (Reuters) - The European Union's banking watchdog published guidance on Thursday to help banks avoid having to step up provisioning for loans to companies temporarily hit by the coronavirus crisis.

Several EU countries have introduced stop-gap "moratoria" such as repayment holidays for companies and individuals as large parts of the economy are in lockdown and unemployment rockets.

"The EBA sees the payment moratoria as effective tools to address short-term liquidity difficulties caused by the limited or suspended operation of many businesses and individuals," the European Banking Authority said in a statement.

Under mandatory accounting rules, banks must step up provisioning, which eats into profits and capital, if the repayment on a loan is missed.

Banks had called for more detailed guidance from EBA on how moratoria can in practice avoid having to reclassify - and therefore increase provisioning - for a loan when a repayment is missed for whatever reason.

Banks are called on to roll over working capital loans for businesses on a daily basis and wanted to know what to do if a repayment was missed, a banking industry official said.

"Do we say 'sorry', no money?" the official added.

Bankers said the moratoria were introduced piecemeal by national governments across the bloc rather than a single measure under EU law, creating legal uncertainties.

In a bid to reassure lenders they are on solid legal territory in following the guidance, EBA sets out the legal basis in EU law for its advice.

EBA said a payment moratoria does not lead to reclassifying a loan if it was launched in response to Covid-19 and is being broadly applied to a wide range of borrowers, adding it only changes the schedule of payments. It does not apply to new loans granted after the moratorium was launched, EBA said.

The guidelines will apply to moratoria introduced before 30 June, 2020, but this could be extended, if considered necessary.

In the meantime, banks should collect information for their regulator about the scope and effects of the use of the moratoria, EBA said.

"Institutions are expected to make use of the general payment moratoria in a transparent manner, providing relevant information to their competent authorities, while specific disclosure requirements to the public will be published at a later point in time," EBA said.

But banks must continue to apply provisioning rules where borrowers face longer-term financial difficulties, and identify where short-term "payment challenges" may lead to insolvency and therefore need to be adequately capitalised, EBA said.

EU banking watchdog sets out relief for virus-hit loans

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email