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Loan interruptions receive the green light from the watchdog again

Banks across Europe will again be allowed to offer payment breaks on mortgages, personal and business loans after the European Banking Authority (EBA) revised its stance on the matter on Wednesday.

He said the reactivation of payment moratoria was a recognition of the “exceptional circumstances” of the second wave of Covid-19 which has swept through Europe in recent weeks.

Lenders will now be allowed to offer breaks on repayments until the end of March.

The EBA guidelines mean that banks can grant payment holidays to customers without negatively affecting customers’ credit ratings or forcing banks to treat loans as in default, which would negatively affect their balance sheets.

However, the EBA rules only apply to systemic payment interruptions. Irish banks currently do not offer a system-wide moratorium on the right to payment, although borrowers may be offered breaks depending on their personal circumstances.

The Federation of Banks and Payments of Ireland (BPFI) said on Wednesday evening that Irish banks do not intend to avail themselves of the relaxed rules and will instead continue to use a “case-by-case approach to support customers affected by the coronavirus pandemic “.

‘Low levels’

BPFI Managing Director Brian Hayes said: “Customer support requests have fallen to extremely low levels in Ireland, and the vast majority of customers have left payment breaks and are back on full refunds. . The situation is not what it was at the start of the year.

This means that any Irish borrower seeking relief due to the economic impact of successive Covid lockdowns will see their default marked against their credit rating as ‘missed or past due’.

“With the continued unfolding of the Covid-19 pandemic, it is crucial that banks continue to provide loans to the real economy while acknowledging any credit issues in order to ensure that problematic loans are properly reflected in their balance sheets, “EBA said in a statement on Wednesday.

Under the now relaxed rules, borrowers could get a moratorium on loan repayments for up to nine months – including any disruption in payments already appreciated earlier this year.

Banks would be required to consult with the central bank on how they would determine that borrowers would be able to meet their repayment obligations after any disruption.

“This reactivation will ensure that loans, which previously did not benefit from payment delays, can now also benefit,” said the EBA.

Margarita W. Wilson

The author Margarita W. Wilson