[ad_1]
The European Banking Authority (EBA) has confirmed that the mortgage and loan repayment breaks, offered to borrowers earlier this year, will be phased out from the end of this month as planned.
The EBA said it had made the decisions after closely monitoring the events resulting from the Covid-19 pandemic.
“These guidelines, which were published in the early phases of the Covid-19 pandemic, have provided the necessary flexibility, as well as certainty about the regulatory framework, in light of the significant number of actions taken by banks to support their clients. as an exceptional blockade. measures were put in place, “he said.
“The continued ability of banks to make loans is of key importance and the EBA will continue to monitor the situation as necessary,” the EBA said.
The major lenders here implemented the option of three-month payment breaks in the spring as the country entered a phase of severe restrictions aimed at preventing the spread of the coronavirus.
Then it was extended for another three months.
The EBA introduced guidelines on April 2 to ensure that banks maintained a comparable approach across Europe so that they could offer breaks without being automatically classified as meeting the definition of forbearance or default.
However, banks have stated that the plan will not be expanded further, despite calls from some sectors of the economy for an additional three-month leniency to protect businesses and jobs.
Instead, banks have said they will engage with clients on a case-by-case basis to find out how they can best meet their commitments in the future.
“The payment moratorium has been an effective tool to address the short-term liquidity challenges caused by the Covid-19 pandemic,” the EBA said in a statement with the vast majority of EU banks participating.
“In addition, depending on the duration of the payment extensions, which in Europe has been on average between six and 12 months, the payment moratorium will continue to produce its effects for a while,” he said.
“However, the EBA does not consider the further extension of such an exceptional measure appropriate in this state. It is timely to return to the practice that any loan rescheduling should follow a case-by-case approach,” he added.
The EBA said that the guidelines will continue to apply to pauses granted before September 30, and this will avoid the risk of having to “abruptly reclassify existing loans at a later stage.”
Data from the Central Bank show that as of September 4, active payment defaults represented 8.6% of the financial system’s loan portfolio, made up of 6.1% of all mortgages, 4.2% of loans consumption and 14.5% of loans to SMEs and corporations.
According to analysts at stockbroker Goodbody, the fourth quarter is likely to be “bumpy” in the bank’s restructuring units.
“It also follows comments from the Central Bank Governor last week that we are now moving further into a world where lenders may need to restructure debts and it is less and less likely that lenders will simply postpone those decisions about which businesses / clients are viable and which are not, “wrote Eamonn Hughes and Barry Egan in a research note.
[ad_2]