Banka Slovenije warns of need to find long-term viable solutions for borrowers in difficulty

Banka Slovenije can report that the anti-crisis measure put in place last year in connection with the loan moratorium has achieved its purpose. Banks and savings banks approved moratoria for 24,000 borrowers while the measure was in place. By far the largest number of applications were submitted in the months after the declaration of epidemic status (in the spring and in November of last year). There was no major inflow of applications in other months, including just before the measure lapsed. Banka Slovenije notes that dealing with the consequences of the Covid-19 crisis, which has now been with us for more than a year, requires solutions that are viable in the long term. Amid the continued support from monetary and fiscal policy, we therefore also expect banks to play a more active role. 

The law requiring banks to approve moratoria for borrowers that request them has over the last year helped to quickly address the difficulties that borrowers faced in the early part of the crisis.

We expect banks to remain diligent and prudent even after the expiry of the mandatory moratorium measure, and to examine all alternatives in addressing their customers’ difficulties. These include the option of a commercial moratorium, which is also a common measure in non-crisis situations (albeit without different regulatory treatment). It may be agreed at any time between a bank and a customer who is temporarily unable to repay a loan. An agreement of this type gives a borrower who for temporary reasons is unable to regularly repay credit liabilities the chance to extend or postpone the repayment of the loan. At the same time it ensures that the bank receives repayment of the loan. In light of the increased risks in connection with individual exposures, banks are required to appropriately reclassify customers (and to create additional impairments and provisions as necessary).

Because practices of this type do not address the issue of the longer-term inability to repay loans, Banka Slovenije is arguing for solutions that are viable in the long term to be found. We therefore also expect banks to take an active approach to any difficulties faced by their customers. We expect customers to be treated individually, and for any restructuring of their liabilities to be undertaken within the framework of the ordinary legal options and regulatory treatment.

Table 1: Monthly changes in number of moratorium applications and exposure covered by applications*

Note: A negative number for a particular month is the result of a revision to the data provided by banks, on the grounds of errors identified in reporting. *Under the Emergency Deferral of Borrowers’ Liabilities Act (ZIUOPOK).

Covid-related liquidity loans

Banks and savings banks had approved 1,474 applications from firms for new Covid-related liquidity loans by the end of March, with a total exposure of EUR 506.1 million. Of that amount, 99 loans in the total amount of EUR 78.8 million were approved under the law that provides for corporate lending backed by a government guarantee.

Table 2: Number of applications for new Covid-related liquidity loans, and exposure

Note: A negative number for a particular month is the result of a revision to the data provided by banks, on the grounds of errors identified in reporting. ** Under the Act on Additional Liquidity to the Economy to Mitigate the Effects of the Covid-19 Epidemic (ZDLGPE); data source: SID banka.