At its extraordinary meeting today, the NBS Executive Board adopted the Decision on Temporary Measures for Banks to Enable Adequate Credit Risk Management amid COVID-19 Pandemic and the Decision on Temporary Measures for Financial Lessors to Enable Adequate Credit Risk Management amid COVID-19 Pandemic.
Having in mind the complexity of the pandemic’s fallout on households and businesses, the NBS established that there is room for taking additional measures with a view to facilitating the repayment of liabilities to all debtors faced with difficulties due to the COVID-19 pandemic and to enable banks and financial lessors to manage credit risk responsibly in the given circumstances.
By these Decisions, the NBS prescribes the measures and activities to be applied by banks and lessors in order to ensure adequate credit risk management, which implies timely identification of debtors faced with potential difficulties and taking of appropriate steps. For this reason, the NBS prescribes an obligation for banks and lessors to approve debt repayment facilities to debtors (natural persons, farmers, entrepreneurs and companies) who due to the conditions caused by the COVID-19 pandemic have or may have difficulties in the repayment of liabilities, at their request.
The NBS assessed that facilities are particularly necessary to unemployed persons, debtors whose average net monthly income in the last three months is below the average wage in the Republic of Serbia, as well as to debtors whose average net monthly income in the last three months is maximum RSD 120,000, whose net monthly income is lower by 10% or more than their income before 15 March 2020 and whose debt to income ratio is above 40%.
When it comes to farmers, entrepreneurs and companies, it was assessed that repayment facilities should be offered in particular to debtors who experienced in 2020 a fall in business revenue, and/or turnover of at least 15% relative to 2019 or a shutdown lasting minimum 30 days in continuity due to the COVID-19 pandemic.
Entitled to these facilities will also be debtors past due for more than 30 days on a materially significant amount in respect of any liability to which the Decision applies. In addition, banks and lessors are given the possibility to approve facilities to debtors, at their reasoned request, if they assess that due to other facts and circumstances the financial position of debtors has deteriorated and they are not able to settle their liabilities.
The facilities envisaged by the above Decisions involve rescheduling and refinancing of loans and financial lease liabilities, as well as a six-month grace period and appropriate extension of repayment term so that the debtor’s monthly liabilities are not higher than those envisaged by the repayment schedule prior to the approval of facilities. Interest is calculated during the grace period, but it is up to the debtor to decide, in the request, whether it will pay interest during the grace period or after its expiry.
Other credit products – credit card and current account overdraft, may be covered by the facilities under this Decision, by approving a loan for refinancing liabilities under those products, with a six-month grace period and an agreed monthly repayment, with the repayment period extended so that monthly liabilities are not higher than those the debtor would pay were it not for the facilities.
We particularly underline that banks/lessors may not charge any fee for the measures and activities taken in accordance with the Decisions, or any costs they may incur in relation with those measures and activities, including the costs of request processing, except costs necessary for the approval of receivables and which are not determined by banks/lessors (e.g. credit bureau or real estate cadastre).
In line with the Decisions, by no later than 22 December 2020 banks and financial lessors will post on their official websites and business premises a notification whereby debtors are informed of the possibility of filing a request for facilities and of the relevant eligibility requirements.
All debtors meeting the prescribed requirements may file with banks/lessors a request for facilities electronically or by post, as well as in person on their business premises until 30 April 2021, though electronic communication is advised due to the current epidemiological situation.
Banks/lessors are required to decide on the filed request and to notify clients of their decision within 30 days of receiving the request.
The adopted Decisions enter into force on 15 December 2020 and debtors may file a request for facilities as early as the following day regardless of the notification from banks/lessors.
As before, the NBS will keep a close eye on the impact of changed circumstanced on all relevant market participants and will act responsibly taking steps within its remit with a view to maintaining financial system stability, which is a precondition for preserving and boosting overall growth of the economy.