Operation of the payment delay

2.5 (question is deleted)

2.6 Is the payment delay granted automatically?

No. Businesses and households will have to demonstrate that they are affected by the coronavirus crisis and have to ask their bank for a payment delay. Each case will be assessed individually. A uniform approach was devised in the Charters so that all banks would apply this in the same way.

2.7 For how long must the banks grant a payment delay?

A distinction should be made between the moratorium for individuals (mortgage loans) and the moratorium for business loans.

a) Loans to individuals (mortgage loans)

On the basis of the first Charter for mortgage credit deferral, a payment delay could be requested any day from 1 April 2020 to 20 September 2020; if the liquidity problems were due to the coronavirus crisis, and the conditions laid down in the first Charter were met, the delay was always to be granted for a maximum of 6 months. This means:

  • All requests up to 30 April 2020: delay for a maximum of 6 months
  • Requests after 30 April 2020: delay until ultimately 31 October 2020

However, the payment delay granted according to the above-mentioned conditions could be extended until 31 December 2020.[1] In all cases, the extension request was to be made between 1 and 20 September 2020.

On the basis of the second Charter for mortgage credit deferral, deferrals may be granted for an additional period of up to 3 months, provided that the combined deferrals granted under the first and second Charter never exceed 9 months. In addition, the payment deferral thus obtained will take effect at the earliest from the due date of January 2021. The deadline for applying for a deferral is 31 March 2021; any deferral granted can therefore never exceed the end of June.

b) Business loans

On the basis of the second Charter for business credit deferral, an additional payment deferral may be requested for future due dates until 30 June 2021 at the latest, provided that the requests for payment deferrals are made no later than 10 calendar days before the maturity date of the credit and no later than 31 March 2021, and that the combined deferrals granted under the first and second Charter never exceed 9 months.

On the basis of the third Charter for business credit deferral, “sound” enterprises/organisations that have already benefited from a maximum payment deferral of 9 months under the first and/or second Charter for business credit deferral can still apply for an additional payment deferral for future maturities until 30 June 2021 at the latest, provided that the requests for payment deferrals are made at least 10 calendar days before the maturity date of the credit. For maturities after 30 June 2021, the banks will look for bespoke solutions together with these companies/organisations.

 

[1] In the initial version, the payment delay could be granted until 31 October 2020 at the latest. This was modified to enable an extension until 31 December 2020.

[2] See footnote 4.

2.8 Is a payment delay only possible until the dates mentioned in the Charters?

Amendments of the Charters involved provided for the possibility to extend the payment delay until 30 June 2021 at the latest for individuals and for business credits. The terms for obtaining an extension are set out in point 2.7. If, however, a payment delay is granted outside the conditions of the first and/or second Charter for mortgage / business credit deferral or in accordance with the conditions of the third Charter for business credit deferral, the bank cannot use the flexible framework drawn up in the EBA statement on COVID-19 measures, published on 25 March 2020 (and further developed in the EBA Guidelines on moratoria).

2.9 Does the payment delay cover both the capital and the interest?

In the case of mortgage loans to natural persons a distinction is made between delay for individuals in the vulnerable group (see the definition in the Charter) and other individuals.

  • Delay of capital and interest for the vulnerable group: the borrower may defer payment of his/her mortgage credit without additional interest during the deferral period. Once this period is over, payments will resume at the same monthly charge as before.
  • Delay of capital and interest for other customers: the borrower may postpone the payment of his/her mortgage loan. Once the deferral period is over, payments will resume at an adjusted monthly rate because the deferred interest will be credited.

For non-financial businesses, SMEs and self-employed persons (including unincorporated self-employed persons) and non-profit organisations, the delay only applies to the capital repayments as regards their credit for professional purposes.

2.10 Delayed payment of interest is prohibited by law in the case of credit to individuals: is it agreed that Article VII.145 of the Code of Economic Law will be temporarily breached?

Yes. This possibility was explicitly introduced by Royal Decree No 11 of 22 April 2020 on measures regarding the terms and conditions of mortgage loans in the context of the coronavirus crisis. Following the extension of the payment delay for mortgage loans, this temporary exception was reconfirmed by the Law of 20 December 2020 on temporary support measures due to the COVID‑19 pandemic.