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3 April 2020

On 3 April 2020 the Governing Council of the Bulgarian National Bank made a decision that it will comply with the Guidelines voted at the European Banking Authority (EBA) on legislative and non-legislative moratoria on loan repayments applied in light of the COVID-19 crisis (EBA/GL/2020/02), and EBA was notified to this effect. The Guidelines are published on the EBA’s website.

Moratoria on loan repayments can be an effective instrument in situations of short-term liquidity difficulties of banks’ customers. Many companies and households would face such difficulties if their work is restricted or discontinued owing to the measures to contain COVID-19. This could in turn have a negative impact on credit institutions, as under the existing regulatory framework delayed or discontinued payments on extended loans lead to additional costs and capital requirements for banks.

Hence, the EBA Guidelines introduce a temporary principle that moratoria on loan repayments should not lead to classification of exposures in default or forbearance, provided that the measures are compliant with the national legislation and are applied at the banking sector level.

Based on the Guidelines voted at EBA, the BNB requested from the commercial banks to propose for approval within 5 business days uniform draft rules of a private moratorium on bank loan repayments in the light of the COVID-19 situation.

The rules drafted by the banks, after their approval by the BNB, for the period of their operation will provide to banks flexibility to offer to their customers concessions on repayment of bank loans.

The details of the concessions provided to households and companies will be announced with the publication of the private moratorium rules.