Businesses want extension of loan deferral, central bank says measure “served its purpose”

Ljubljana – Business chambers have called on the government to extent the scheme under which they may request a deferral of loan payments, an appeal that came just after the central bank said this measure had “served its purpose” and was not sustainable in the long term.

The Chamber of Commerce and Industry (GZS), the Chamber of Craft and Small Business (OZS) and the Bank Association said Thursday that the next economic stimulus package should include an extension of the deferral of liabilities until the end of the year and an extension of the loan guarantee scheme.

Arguing that companies are still facing heightened risk while the share of non-performing loans on bank balance sheets has increased, they said the extension would “preserve the long-term viability of the economy and mitigate the distress of the people”.

They called on the central bank to urgently propose to the European Bank Authority (EBA) to extend the current regulatory treatment of moratoriums until the end of the year, at least for sectors that have been shut down by government decree.

The statement came right as Banka Slovenije, the Slovenian central bank, said loan deferral had “served its purpose” and warned that this was not a solution that would be sustainable in the long term.

It said the measure was good at addressing temporary liquidity issues, in that borrowers get a reprieve while banks do not need to set aside provisions or conduct write-downs on approved moratoriums.

Alas, it is not sustainable in the long term. “If it was valid for too long, stability of the entire banking system would be jeopardised in the event bad loans accumulate,” it said in a statement on Thursday.

When borrowers’ problems are of a long-term nature, an individual approach to the restructuring of financial liabilities is needed, something banks will still be able to do when the loan deferral scheme ends.

It said all solutions in place in Slovenia were comparable to those in other eurozone countries. “Banks in Slovenia and their clients have been provided with the same conditions that apply in other eurozone members. This is the principle that Banka Slovenije plans to pursue in the future.”

Corporate and household borrowers have been able to request a deferral of loan payments since last spring. The final date by which applications for deferrals are accepted is 26 February, and the last loan moratoriums will end in November.