EU regulator extends repayment holidays amid second wave

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The EU banking regulator has extended loan repayment holidays for companies struggling during the pandemic.

The European banking regulator is allowing banks to grant a new round of loan repayment holidays amid a second wave of infections. 

The European Banking Authority (EBA) has today announced that guidance on legislative and non-legislative moratoria that expired on 30 September is being reactivated until March 31 2021. 

“The role of banks to ensure the continued flow of lending to clients remains of utmost importance and with the reactivation of these Guidelines, the EBA recognises the exceptional circumstances of the second Covid-19 wave,” the watchdog said today. 

Banks started to grant payment holidays on company loans, mortgages and other types of credits as the initial impact of the pandemic hit. Loans totalling 871bn had benefited from the relief measures by June. 

In a report published last month the EBA said the use of payment holidays was “widely dispersed across countries and banks” with some banks reporting that up to half of their total loans to non-financial companies and households were subject to a moratoria. 

The EBA said that loans which had previously not benefited from the moratoria can now benefit from them, but added that it had added two “constraints” to ensure the support is limited to bridging liquidity shortages triggered by new lockdowns. 

Europe has been hit hard by the second wave with Germany inching towards even tougher measures in regions that had been spared the worst. 

The regulator has said that loans could only benefit from a repayment holiday for a total of nine months in total and banks must set out plans for loans that are likely to default. 

Last month the UK regulator outlined plans to bolster support for borrowers struggling in the pandemic.

The Financial Conduct Authority announced plans to extend payment holidays for credit cards, car finance, personal loans and pawnbroking ahead of the second national lockdown.

The Treasury has also extended its emergency business loan scheme and will allow firms to “top up” their borrowing until the end of January.