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National Bank of Serbia introduces third moratorium on loan…

National Bank of Serbia introduces third moratorium on loan and lease repayments

On 14 December 2020, the National Bank of Serbia (NBS) adopted the Decision on interim measures for banks to ensure appropriate management of credit risk during the Covid-19 pandemic and the Decision on interim measures for financial leasing forms to ensure appropriate management of credit risk during the Covid-19 pandemic. Both regulations extend the two original sets of rules, introduced in March and June 2020, respectively, which brought in moratoriums on loan repayments and similar financial exposures.

The NBS rules require banks and financial lessors to approve relaxed loan and lease terms to clients (private individuals, registered farmers, sole traders, and companies) unable to repay their debts as they become due owing to the impact of the Covid-19 outbreak. Apart from mandating these relief measures, the NBS has also allowed voluntary restructuring, at the banks’ discretion, of loans to clients that do not meet the requirements but whose circumstances reasonably indicate the restructuring. Unlike the previous two moratoriums, where the standstill period was in effect mandated by operation of the rules, debts will now not be deferred automatically; rather, clients will have to apply and must meet the eligibility requirements.

The relief entails debt restructuring or refinancing, with a mandatory additional six-month grace period; monthly payments may not be increased; repayment periods will be extended; and no administrative fees will be chargeable for the restructuring or refinancing. Interest will continue to accrue during the grace period, and clients are free to choose whether to continue making interest payments whilst the payments are deferred or after the grace period ends.

The key eligibility requirement for private individuals is being unemployed. Individuals who do hold jobs may also qualify, but must have a debt-to-income ratio of over 40 percent and must meet at least one of the following conditions:

  1. having earned an average net monthly income over the previous three months below the Serbian average monthly wage; or
  2. for individuals earning up to 120,000 dinars net a month over the previous three months, having had their income reduced by 10 or more percent relative to before 15 March 2020.

Businesses (companies, sole traders, and registered farmers) will be eligible provided their revenue in 2020 was lower by 15 or more percent relative to 2019.

The new benefits will also extend to borrowers in default for up to 30 days for a material portion of the outstanding amount owed.

Applications for relief under the third moratorium can be made until 30 April 2021, and banks must decide on any such requests within 30 days.