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    MFSA Circular on Treatment and Reporting of Loan Moratoria

    January 15, 2021

    MFSA published a circular for credit institutions on the treatment and reporting of moratoria on loan repayments applied in light of the COVID-19 crisis. The circular aims to provide clarifications about application of the EBA guidelines on legislative and non-legislative moratoria on loan repayments amid the COVID-19 crisis (EBA/GL/2020/02) and as further amended by EBA/GL/2020/08 and by EBA/GL/2020/15. In addition, MFSA updated the guidelines to the Capital Requirements Directive (CRD) IV supervisory reporting requirements for credit institutions, along with the guidelines on supervisory reporting requirements for foreign branches.

    EBA guidelines lay down the conditions that shall be met by legislative and non-legislative moratoria granted in the wake of the COVID-19 crisis, to be able to benefit from the preferential treatment outlined in the said guidelines—that is, the forbearance classification will not be triggered. In this respect, MFSA would like to clarify that:

    • Any legislative moratoria that have been granted and the conditions which are in line with the provisions of CBM Directive No. 18 on moratoria on credit facilities in exceptional circumstances and the EBA guidelines shall benefit from the preferential treatment provided for in the EBA guidelines
    • Any non-legislative moratoria that have been granted and which conditions are in line with the EBA guidelines shall benefit from the preferential treatment provided for in the EBA guidelines
    • Any legislative and non-legislative moratoria that have been granted in other jurisdictions, including non-EU countries, and which conditions are in line with the EBA guidelines shall benefit from the preferential treatment provided for in the EBA guidelines
    • Any moratoria arising from the effects of the COVID-19 crisis that have been granted prior to publication of the CMB Directive No. 18 (that is, before April 13, 2020) shall be treated as legislative moratoria thus benefitting from the preferential treatment provided for in the EBA guidelines
    • Any other moratoria arising from the effects of the COVID-19 crisis, which have been granted on a voluntary basis and individually by a credit institution after the publication of the CBM Directive No. 18 and which conditions are neither fully in line with the Directive nor with the EBA guidelines, shall not be eligible for preferential treatment in accordance with the EBA guidelines.

    In terms of reporting requirements pursuant to the Banking Rule 23 and the EBA guidelines on reporting and disclosure of exposures amid COVID-19 crisis, MFSA clarified that moratoria, which are eligible for preferential treatment, shall be considered as EBA-compliant moratoria. Other granted moratoria that are not eligible for preferential treatment shall be considered as “other COVID-19-related forbearance measures.”

     

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    Keywords: Europe, Malta, Banking, COVID-19, Loan Moratorium, Loan Repayment, Reporting, CRD IV, Preferential Treatment, EBA, MFSA

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