10 April 2020
The Governing Council of the Bulgarian National Bank approved the draft Procedure for Deferral and Settlement of Liabilities Payable to Banks and their Subsidiaries – Financial Institutions in relation to the state of emergency enforced by the National Assembly on 13 March 2020, approved by the Association of Banks in Bulgaria (ABB). After its approval, the document constitutes a private moratorium within the meaning of the Guidelines of the European Banking Authority on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis (EBA/GL/2020/02). The EBA Guidelines were adopted for implementation with a decision of the BNB Governing Council of 3 April 2020 and are published on EBA’s website.
Commercial banks that have accepted to implement the approved procedures for deferral and settlement of payable liabilities will announce publicly the proposed concessions on their websites, the banks’ public premises and in any other appropriate manner.
The approved private moratorium provides opportunities for changes in the principal and/or interest payment schedule of liabilities, without changing any key parameters of the loan agreement, e.g. the already agreed interest. Liabilities may be deferred for a term of up to 6 months, ending on 31 December 2020. The deferred liabilities must have been regularly serviced or not more than 90 days past due as of 1 March 2020.
Customers should declare explicitly to their servicing bank that they wish to avail of the proposed concessions.
Three standard mechanisms are provided for:
• Mechanism No 1 – deferral of principal and interest for up to 6 months;
• Mechanism No 2 - deferral of principal for up to 6 months;
• Mechanism No 3, applicable to revolving products.
The respective mechanism will be selected by mutual consent between the banks and their customers.
The complete text of the approved procedure for deferral and settlement of liabilities payable to banks and their subsidiaries – financial institutions can be found here.
Banks may also agree with their customers different individual deferral and concession schemes, other than the ones provided under this procedure. In such cases, banks may not avail of the temporary principle, implemented by the approved moratorium and following the EBA Guidelines, that the deferral or concession does not result in classification of exposures in default or forbearance.