Procedure for deferral and settlement of payables to banks and their subsidiaries – financial institutions in connection with the state of emergency declared by the National Assembly on 13.03.2020 arising from the Covid-19 pandemic.
In accordance with the European Banking Authority’s Guidelines of 02/04/2020 – Guidelines on legislative and non-legislative moratoria on loan repayments applied in light of the COVID-19 crisis (EBA/GL/2020/02), the Bulgarian Banking Association adopted the Order for Deferral and Settlement of Payables to Banks and Their Subsidiaries – Financial Institutions in connection with the state of emergency declared on 13.03.2020 by the Covid-19 pandemic (hereinafter only ”The Order”). This order provides for the possibility of reaching the so-called private payment moratorium related to the deferral of monetary obligations under the credit agreement for a specified period, during which no payment of all or part of the monetary obligations is due. In order to reach a debt deferral, the bank and the borrower must reach a deferral agreement.
The deferral cannot be for a period longer than 6 and the maturity of the deferred debt cannot be longer than 31/12/2020. The deferral period is called a grace period and, when an agreement is reached, applies whether or not another grace period has been agreed and used prior to the adoption of the order by the respective bank. Deferred liabilities are repaid in installments after the grace period has expired / p.2.4./. In most cases, a deferred agreement has the effect of renewing the borrower’s obligation by setting a new term and new amounts of payment of the outstanding balance.
The order can be applied by any commercial bank and its subsidiary, which is a financial institution / item. 9 /. Any bank that has agreed to apply the loan deferral order should make this fact public (on its website and in its offices). The statement of application of the order applies to all borrowers under contract with the bank, regardless of the type of loan, by their quality / natural person, legal entity, association / or by domicile / place of registration / local or foreign person /
Borrowers eligible to claim a deferral:
Any borrower who meets the requirements below is eligible to claim a deferral. The borrower has the initiative to defer the contractual obligation. The application must be made in writing and the written form shall be considered complied with and in the execution of the statement electronically in compliance with the requirements of Art. 3, para. 2nd verse 1 of the Electronic Document and Electronic Certification Services Act. The deadline for submitting the deferral proposal is 22.06.2020, and the deadline for the bank to accept or reject the deferral proposal is 30.06.2020 / t. 2.5./. Although not specified in the Order, the borrower may also provide specific evidence of circumstances justifying the request for a deferral / existing or expected difficulties in the performance of the contract /
Eligible borrowers are those who:
a / are affected by the restrictions imposed in connection with the application of the Law on Measures and Actions during the Emergency or expect difficulties in the exact fulfillment of their monetary obligations under a credit agreement / p.1.1./
b / have regularly fulfilled their obligations either on 01.03.2020 or are not in arrears of their obligation to pay amounts under the credit agreement for more than 90 days. / t. 1.2./
c) have concluded the credit agreement before 31.03.2020 / p. 2.9./
Liabilities for which deferral is allowed:
In terms of the maturity of the liability, deferrals may be requested for both payables matured after 01.01.2020 and future payables that mature in the agreed grace period. / t. 2.6./
In terms of the type of obligation, they can be deferred.
There are three types of deferral agreements:
a / Agreement for deferral of principal and interest for a term up to 6 months, but not later than 31.12.2020. In this case, the borrower does not owe payment under the contract for the grace period. A new repayment plan is drawn up, which is longer than originally agreed according to the grace period, but not more than 6 months. Deferred installments are paid after the grace period has expired. To all or part of the installments of the new repayment plan, an equal portion of the interest on the deferred installments is added. / t. 3 /
b / Agreement for deferral of principal only for a term up to 6 months, but not later than 31.12.20202. In this case, the borrower owes payment of the interest, which matures during the grace period. Upon deferral of the principal, a new repayment plan is drawn up that is longer than originally agreed with the term of the deferral and includes the outstanding principal during the grace period. / t. 4 /
c) in the case of revolving credits, revolving is permitted despite the presence of unpaid installments. The payment of the installments is deferred up to 6 months, but not later than 31.12.2020. After the expiration of the grace period, the formation of a minimum amount for the revolutions is restored and the loan is serviced according to the original contract. For a period of up to 6 months, but not later than 31.12.2020, the due monthly interest on an overdraft loan shall be repaid at the expense of an unused limit or its payment shall be deferred for a period of up to 6 months after the end of the grace period.