Chamber of SMEs welcomes moratorium on loans

Miguela Xuereb

The Malta Chamber of SMEs welcomed a six-month moratorium on loan payments in a statement on Tuesday.

On Tuesday morning, the Central Bank of Malta issued the Moratorium on Credit Facilities Regulations in Exceptional Circumstances after a legal notice was published. The bank has directed credit and financial institutions licensed by the Malta Financial Services Authority to offer a six-month moratorium on repayments on capital and interest for borrowers who have been negatively affected by COVID-19.

A moratorium is a temporary suspension of a borrower’s repayment obligations. The borrowers eligible for this moratorium will be permitted to postpone capital and/or interest repayments to a later date without incurring any penalties or restructuring/administrative fees.

In a statement the Malta Chamber of SMEs said that it was of the believe that moratorium for loans is an “essential basic necessity”. The chamber said that some businesses had reported difficulties in getting a moratorium coupled with bureaucratic procedures.

Reacting to the news the chamber said that it represented another important pillar in the support mechanism during the COVID-19 crisis.

The chamber said that it had been focused on discussions with the government and the Malta Bankers Association on the possibility to support struggling businesses.

“Even though individual banks have been adapting to the current situation and
implementing their own individual support measures, as an SME Chamber we felt that a
more coordinated and concerted effort was necessary without any further delays.”

The chamber said that this measure along with other schemes launched through the Malta Development Bank will be crucial for businesses to stay afloat during this critical time.

“It is very important for businesses to survive this crisis because closing resorting to closure of business permanent will have a far more devastating effects on the economy,” the Chamber said.

The chamber called for the lowering of costs associated with accessing financial and banking costs, adding that Malta like other jurisdictions has suffered a very extensive blow and changes were required to sustain businesses during the economic crisis sparked by the coronavirus.

“Interest rates should be lowered drastically to reflect the dire situation businesses and the country as a whole are in. Charges on electronic payments should be lowered to encourage use and reduce costs to businesses and consumers. Other unnecessary costs related to a number of bank charges and internet banking facilities should also be waived.”

Central Bank issues Directive 18

Those who are eligible for the moratorium and other conditions related to the implementation of the provisions of the regulations are outlined in Directive 18 which was issued by the Central Bank of Malta.

The moratorium applies to credit facilities sanctioned prior to 1 March 2020 – whether to individuals, households or businesses – and who can show that they have been negatively affected by the pandemic. Applications by borrowers are to be made with their respective credit or financial institution until 30 June 2020.

The moratorium and the duration of the application period may extended by the Health Minister. Such a decision would be taken in consultation with the Finance Minister.

The Central Bank outlined some of the key points in the Directive:

  • Borrower will need to apply to the respective credit or financial institution. The moratorium comes into effect once the application has been approved. Borrowers have until 30 June 2020 to apply. If a moratorium has already been taken one can renegotiate the terms subject to agreement with the credit or financial institution under this directive.
  • Credit and financial institutions have the right to refuse the application as long as this is done within the terms of the Directive. However, please note that borrowers who have been in arrears prior to 1 March 2020 are not eligible for the moratorium.
  • Borrowers can apply to forego payments of both capital and interest completely for six months, and can also opt to continue to pay the interest but not the capital.
  • The payments missed during the moratorium will be paid during a six-month extension to the term of the credit facility. If the credit facility was due to mature at retirement age, the missed payments would be spread evenly throughout the remaining term of the credit facility after the end of the moratorium period.