On 10 April 2020, Bulgarian National Bank (‘ BNB’) issued a press release that its Governing Board has affirmed the draft Rules for deferral and arrangement of liabilities due to banks and their subsidiaries – financial institutions, in relation to the state of emergency adopted by the National Assembly on 13 March 2020 in response to the COVID-19 pandemic (the ‘ Rules’). The Rules were proposed by the Association of Banks in Bulgaria in accordance with a Resolution of the BNB Governing Board of 03 April 2020 for compliance with the Guidelines of the European Banking Authority on legislative and non-legislative moratoria on loan repayments applied in light of the COVID-19 crisis (EBA/GL/2020/02) (the ‘ EBA Guidelines’). After the affirmation of the Rules by BNB, they constitute private moratoria in terms of the EBA Guidelines.
1. The Rules apply to clients, cumulatively compliant with the following conditions:
1.1. Borrowers (banks’ customers), with the exception of credit institutions, which due to the COVID-19 pandemic and the restrictions introduced with the State of Emergency Measures Act (SEMA), have or expect to have difficulties in the repayment of liabilities in accordance with the agreement executed with the creditor.
1.2. As at 01 March 2020, the liabilities of the customers under section 1.1 are serviced regularly or are in default for not more than ninety (90) days.
1.3. The customers express explicitly their willingness to use the reliefs proposed by the creditor.
2. General parameters of the reliefs
2.1. Each bank, which accepts to apply the Rules, announces publicly the proposed reliefs on its website, in the bank’s offices and by any other appropriate means. The announcement is deemed to be addressed to all customers, which are compliant with the above requirements. The announcement must provide information on the procedure, under which the bank will negotiate deferral of the liabilities, and it must establish the initial moment as from which the deferral will be applied.
2.2. Liabilities can be deferred for a period of up to six (6) months, which should expire not later than 31 December 2020. The final date may vary depending on the date, on which the customer has requested totake advantage of the relief of deferral, as well as on the presence of overdue repayments as of that date.
2.3. Deferral may cover all due amounts or principal amount(s) only. The deferral period is also referred to as ‘grace period’.
2.4. Amounts not paid on the originally agreed maturity dates are repaid in portions after expiry of the grace period in accordance with the applicable deferral period, unless otherwise provided for in the applicable mechanism.
2.5. Deferral may be requested by any customer, compliant with the requirements under item 1 above, not later than 22 June 2020. The creditor must adopt a decision until 30 June 2020.
2.6. The request for deferral may include repayments that were overdue prior to the request’s submission, as well repayments with maturity dates not yetoccurred. If as of the date of submitting the request, the customer is not in default, the deferral applies only in future – for repayments with maturity dates not yet occurred.
2.7. The date, on which the customer’s deferral request is submitted, does not amend the total time period of the deferral as per item 2.2 above.
2.8. The customer is entitled to forgo the provided grace period earlier than agreed and to request the preparation of a repayment schedule.
2.9. The proposed mechanisms for deferral and arrangement of liabilities apply only to liabilities arising out of agreements executed prior to 31 March 2020.
3. Mechanism No. 1 – deferral of principal and interest for up to six (6) months
3.1. The due amounts (principal and interest) are deferred for a period of up to six (6) months but not later than 31 December 2020.
3.2. The aggregate residual amount of the debt, together with the principal not paid during the grace period under item 3.1, are repaid in accordance with a new repayment schedule for a period longer with up to six (6) months than the original one, depending on the number of the repayments deferred.
3.3. An equal portion of the interest not paid during the grace period is added to each repayment under the repayment schedule until the expiry date of the loan or within other reasonable shorter time period agreed with the borrower.
4. Mechanism No. 2 – deferral of principal for a period of up to six (6) months
4.1. The due principal amounts are deferred for a period of up to six (6) months but not later than 31 December 2020.
4.2. The interest due for the period is paid as per the agreement.
4.3. After expiry of the grace period, a new repayment schedule is prepared to cover the aggregate residual amount of the debt including principal not paid during the grace period. The new repayment schedule is prolonged depending on the number of repayments not paid but for not longer than six (6) months.
5. Mechanism No. 3 – applicable to revolving products
5.1. Revolving of a credit line is admissible regardless of the fact that due repayments or portions of them are not paid. The repayments are deferred for up to six (6) months but for not later than 31 December 2020.
5.2. No minimum amount is formed for revolving of a credit limit under a credit card, as of 01 February 2020 at the earliest, for a period of up to six (6) months but not later than 31 December 2020. Upon expiry of the grace period, the formation of a minimum amount for revolving is resumed and the credit is serviced as per the original agreement.
5.3. For a period of up to six (6) months but not later than 31 December 2020, the monthly interest due under overdraft credit facility is repaid for the account of credit limit not utilized or monthly interest repayment is deferred for a period of six (6) months after the expiry of the grace period.
5.4. Items 5.1, 5.2 and 5.3 are applied separately to the credit products specified in them.
6. Selection of deferral mechanism
6.1. The selection of a deferral mechanism is realized by mutual consent of the parties.
The Rules also apply to non-banking financial institutions, which are subsidiaries of banks.
The creditors may also agree with their customers individual deferral schemes, as well as other reliefs different from those under the Rules.
Source: Bulgarian National Bank