Govt proposes extending loan deferment by year’s end

Ljubljana – The government is proposing the sixth coronavirus relief package be amended to extend the moratorium on bank loan repayments for some types of borrowers until the end of the year. The amendments are to be rushed through parliament.

Under the proposal, released among items under discussion by the government, extension would be granted to borrowers engaged in activities that have been temporarily banned due to coronavirus after 12 March and who are still not able to pay their dues to banks on time.

Also eligible would be borrowers who generate the bulk of revenue with services or goods sold to the borrowers who cannot do business due to coronavirus restrictions.

The Ministry of Finance believes those categories of borrowers will have mostly tapped on the deferment, which allowed banks to defer loan payments by 12 months. Most of those deferments were approved in March and April 2020, which means the measure would expire in April for most.

The ministry believes that due to the long duration of the pandemic, the businesses are still not able to honour their commitments under loan agreements, hence the proposal to amend the law to grant them a new deferment until the end of 2021.

“This is regardless of whether they have already utilised the option, thus exceeding the currently valid total deferment limit of nine months,” said the ministry. The borrowers can apply to banks for a deferment by the end of June.

In December 2020, the European Banking Authority capped the total length of loan payment deferment at nine months, but considering the persisting pandemic and the fact that the deferments are allowing businesses to solve their temporary liquidity problems the ministry expects the EBA will make the extension possible.

Business associations urged the government in mid-February to extend deferment of liabilities, including under lease-to-buy contracts, until the end of the year.

The Slovenian central bank said at the time the measure had achieved its purpose, on the one hand helping borrowers whose problems are limited to the time of crisis and on the other contributing to preserving a relatively high capital adequacy of banks.