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    CBM Amends Directive on Loan Moratoria Amid Pandemic

    January 14, 2021

    CBM announced that, in view of the impact of COVID-19 pandemic, the Minister for Health, in consultation with the Ministry for Finance, issued Legal Notice 15 on the reactivation of moratoria in Malta. This reactivation allows borrowers to submit their applications for new moratoria or to extend their existing moratoria subject to a number of conditions, before March 31, 2021. In this context, CBM has amended Directive 18 on moratoria on credit facilities in exceptional circumstances. CBM also published a guide on the amendments to the Directive 18, which includes questions and answers to help borrowers understand the options available in their current circumstances.

    In light of the differing economic conditions to those prevalent when CBM Directive 18 was originally issued, the application period is being reactivated with targeted conditions, according to which an applicant can benefit either from the extension to an existing moratorium, or a completely new moratorium. Applicants who are applying for moratorium on a loan that was never subject to a moratorium are entitled to a moratorium of up to nine months. However, borrowers who have benefited, or are benefiting, from a moratorium shorter than nine months can apply for an extension so that the duration of their existing moratorium would be extended to cover a moratoria period of no more than nine months in total. Loans already benefiting from a moratorium period of more than nine months will not be eligible for a further extension.

    In addition, CBM has amended the Directive No. 8 to establish a new Additional Credit Claims (ACC) framework for individual credit claims granted by credit institutions in Malta that are accredited by the Malta Development Bank under the COVID-19 Government Guarantee Scheme. To this effect, CBM implemented the terms and conditions of the domestic ACC framework as approved by the Governing Council through amendments effected to its Directive No. 8. The amendments to the Directive include CBM’s acceptance of ACC as collateral for Eurosystem monetary policy operations as well as introduction of a new Annex 15 to the Directive, laying down the terms and conditions of the domestic ACC framework. The amendments became applicable from January 01, 2021.

     

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    Keywords: Europe, Malta, Banking, COVID-19, Loan Repayment, Loan Moratorium, Credit Risk, Additional Credit Claim, CBM

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