Banks will again be able to offer payment breaks to those impacted by pandemic after U-turn at European level
(Stock image)
(Stock image)
Charlie Weston
December 02 2020 10:30 AM
EUROPEAN regulators have cleared the way for banks here to offer new payment breaks.
The change of tack by the European Banking Authority (EBA) is in response to the second wave of coronavirus cases across Europe.
In September the watchdog decided not to extend guidelines for blanket Covid-19 payment breaks.
This was driven by a need to ensure banks’ accounts remain reliable, despite the continued negative economic impact of the pandemic, the EBA said at the time.
The U-turn will mean that banks here will be able to offer under-pressure mortgage holders, people unable to pay small loans, and businesses struggling due to lockdowns to avail of new breaks on payments.
The EBA, which now regulates all large banks across Europe, said it was reactivating its guidelines on loans “moratoria” after closely monitoring the developments of the pandemic and the impact of government restrictions in many EU countries.
“This reactivation will ensure that loans, which had previously not benefitted from payment moratoria, can now also benefit from them,” it said in a statement.
It has set two conditions for the application of the new loan breaks.
Only loans that are suspended, postponed or reduced under general payment moratoria not more than nine months in total, including previously granted payment holidays, can benefit from the application of the guidelines.
Lenders have been requested to document to their supervisor their plans for assessing that the loans subject to general payment moratoria do not become unlikely to pay.
This requirement will allow supervisors to take any appropriate action, the EBA said.
Payment breaks here were put in place between March and September. Most have come to an end.
Banks across the EU were allowed by the EBA guidelines to avoid categorising short-term payment breaks as non-performing debt.
This meant banks were not required banks to set aside further loan-loss provisions, while borrowers’ were promised their credit records were not impacted.
Most Irish mortgage holders who got a payment break due to an income shock from the pandemic are back making full payments.
One in eight of those who got a deal to stop paying their home loan are still unable to resume payments, recent figures from the Banking and Payments Federation show.
A total of 65,300 mortgage payment breaks were put in place, with most now back paying their monthly repayment.
Some 8,800 are still on mortgage payment breaks, the representative body for lenders said.
Small firms got 33,200 breaks, with 5,700 still active.
Overall, some 153,000 payment breaks of various kinds have been granted this year by the banks, non-bank lenders and credit service firms.
The payment breaks allow for monthly repayments of capital and interest to be deferred for an agreed period of time.
They were initially offered for three months but the scheme was extended for another three months.
Taking one of these breaks does not have a negative impact on the borrower’s credit rating.
Collected from all the lenders, the figures show that 1,600 buy-to-let mortgages were on payment breaks.
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