Closer to the announcement of measures that will relieve a large number of borrowers is the government, under the weight of yesterday's painful decisions for restrictions, which force a large part of private economic activity to close by the end of the month. Yesterday's news of “F” for the implementation of a new, six-month, plan for suspension of installments, under terms and conditions, was confirmed and now it is a matter of time before the official announcement, something that may be done within the day by Finance Minister Konstantinos Petridis.
The Ministry of Finance has been conducting paper exercises in recent days to find the safest way for the financial system to benefit from installments of households and businesses that have been consistent in their obligations and are currently being tested by the prolonged crisis. The government's wish, however, is, this time, a targeted rather than a horizontal installment suspension, as was the case last time.
The implementation of the new lockdown and the voices of the business world for the big reduction of revenues and the lack of liquidity led the government to a final decision for a new suspension of loans for a period of six months, ie until 30/6/21. Borrowers who have not taken advantage of the installment suspension in the previous nine months, when the first moratorium was in place, will be able to take advantage.
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The issue of the suspension of installments was also discussed yesterday by the Board of Directors of the Central Bank, in view of the decree that is expected to be issued by the Ministry of Finance. As “F” wrote yesterday, the planning for the new installment suspension plan has been done, but there must also be the approval of the national supervisor, who must assess whether the financial stability is affected. The information states that the CBC does not object to the plan, as it was presented before it yesterday. Of course, in addition to the Central Bank, the installment suspension measures will have to secure the approval of the European Central Bank.
The beneficiaries of the new plan
According to information from “F”, the scenario elaborated by the Ministry of Finance provides the following:
– Those who have already used the moratorium and completed 9 months, can not benefit again, regardless of whether they are directly affected by the new lockdown. The total suspension of doses can not exceed a total of 9 months.
– Loans secured by the main residence (up to 350,000 euros) can be suspended their installment until 30/06/2021 (individuals and small and medium enterprises), without any other parameter.
Beneficiaries of the suspension will also be companies that will be on full suspension from tomorrow Sunday, as well as the hotel sector, as long as they have not completed the 9 months of suspension in the previous period.
– Borrowers who belong to the above three categories and who have suspended their installments with the previous measure, will be entitled to continue the suspension until they complete a total of 9 months (essentially will go until 31/3/2021).
– Borrowers to be eligible to express interest should not have delays of more than 30 days on 31/12/2020.
The installment suspension that ended at the end of December 2020 concerned loans worth € 12 billion and over 50 thousand customers. Based on the data processing that has been done, all those who were approved for the previous moratorium have been suspended from doses for at least 6 months. The majority has been suspended for 9 months. A number of borrowers who applied in May and June 2020 and did not request a retroactive suspension will be eligible to benefit now, depending on the months they did not request a retroactive suspension.
It should be noted that the decision of the Ministry of Finance is in line with the guidelines issued by the European Banking Authority on 2 December. The aim was to ensure that loans that had not previously benefited from the suspension of payments could benefit from it for a total period of 9 months. The European Authority had emphasized that only loans suspended, deferred or reduced on the basis of a general suspension of payments for a period not exceeding 9 months in total, including previously disrupted payments, could benefit from the application of the new directives.
According to the European Authority study, almost half of the total loans to households and businesses in Cyprus were under moratorium. By contrast, banks in Germany, Luxembourg and Latvia reported the lowest share of loans subject to a moratorium. In Germany, which usually lends itself to post-crisis policies, only 1.6% of loans have been suspended.