Banks, Business, Covid-19, Crisis, Good for Business, Latvia, Loan, Markets and Companies

The moratorium has been agreed with the Financial and Capital Market Commission, and has also been reviewed by the Competition Council of Latvia after consultations with the European Commission.

“The development of this moratorium is a continuation of the moratorium for private individuals on the delay of base loan repayments for a set period of time, which was confirmed last week. As of now, the banks have reviewed loan agreements and the repayment of remaining payments for more than 2,450 transactions in the business segment. We recognise that the consequences of the state of emergency in the business segment will continue to develop gradually, which is why the Association and its members have developed a moratorium in accordance with best practices and using guidelines from  the European Banking Authority. This document will allow changes to loan agreements to be made as effectively and uniformly as possible. Any credit institution, its subsidiaries and branches can join the moratorium, and it can be observed individually by any Latvian crediting market participant which issues loans to businesses,”,- emphasises Sanita Bajāre, Head of the Finance Latvia Association.

Financial institutions will publish news of joining the moratorium on their websites, and will also inform the Financial and Capital Market Commission, the Competition Council of Latvia and the Association. The Association will receive up-to-date information from the financial institutions on the total number of clients and loans for whom base loan repayments have been delayed. The financial institution may apply the moratorium to one or both service types: loans and/or leasing. It should be said that the moratorium applies to loan agreements with a fixed repayment plan. The total sum of a client’s obligations in accordance with all loan agreements within one financial institution must not exceed 5 mln Euro. Clients whose obligations exceed this sum will be assessed individually.

The moratorium applies to legal persons and other performers of economic activity who are not self employed. The moratorium will change the repayment schedule of the base sum if the loan agreement stipulates the repayment of the base sum in parts. According to the client’s wishes, the repayment of the base sum is partially or fully delayed for the period stated in the moratorium of up to six months. During this period, the client must continue to pay interest, insurance premiums and other payments stated in the loan agreement which are not the base repayment sum. Financial institutions may not ask for additional collateral or increase the interest rate.

Clients can delay their base loan repayments in accordance with the terms of the moratorium once. If the client received a loan break between March 12th, 2020 and the day the moratorium comes into force, the financial institution has the right to change this in accordance with the moratorium per the client’s request. Commission fees for processing the moratorium only apply for the amount needed to prepare documentation for the agreement amendment.

The moratorium stipulates that a business can delay the fulfilment of base loan repayments if they were not in financial difficulties before March 12th, 2020, or if there are no insurmountable obstacles in repaying the loan.

A business can apply for the use of the moratorium if the company’s own capital was positive at the end of the previous financial year, and if loan repayments were no more than 30 days late within the past year from March 12th, 2019. The client must state the reason, linked with COVID-19, for their worsened financial circumstances to their financial institution.

The moratorium does not apply to businesses whose main business is gambling. The moratorium will also not be applied to businesses which are insolvent, bankrupt or who have gone into administration. It will also not be applied to businesses with whom relations have been ceased in accordance with  prevention of money laundering and terrorism and proliferation financing laws or international financial sanctions.

The moratorium comes into force on May 5th, 2020, and remains in force until the Association issues notification of its ending. Clients must apply to delay their base loan repayments by June 12th, 2020, and the financial institution must make a decision by June 30th, 2020.

As of now, the following institutions have announced their willingness to join the moratorium: Swedbank, SEB banka, Luminor, Citadele, ALTUM, BlueOrange Bank, OP Corporate Bank, Reģionālā investīciju banka, Industra Bank, Expobank, Signet Bank.