Covid-19: Economic measures covering the banking and financial sector. Facilities in relation to loans granted by credit institutions and non-banking financial institutions to certain categories of borrowers
The National Bank of Romania (the “NBR”) issued a press release on 24 March 2020, pursuant to which the current regulations allow the borrowers, banking and non-banking institutions, to defer the payment of the credits of any natural person affected by the Covid-19 pandemic, without applying the conditions provided by the NBR Regulation no. 17/2012 regarding certain credit conditions.
As a result, the Romanian Government undertook to provide economic measures in view of mitigating the negative effects of the Covid-19 pandemic on the banking and financial sector and, following intense political debates, Government Emergency Ordinance no. 37/2020 on granting facilities in relation to loans granted by credit institutions and non-banking financial institutions to certain categories of borrowers (“GEO 37/2020”) was published in the Official Gazette of Romania No. 261 dated 30 March 2020.
Application norms for GEO 37/2020 were also approved in the meantime.
GEO 37/2020 offers the possibility of suspending the payment of instalments (capital, interest and commission fees) due under loans granted by creditors such as banks, non-banking financial institutions and branches opened in Romania by foreign credit institutions and non-banking financial institutions.
Foreign credit institutions and non-banking financial institutions, such as foreign entities from other EU Member States exercising their freedom to provide services within the territory of Romania on a cross-border basis (without establishing branches) are not mentioned by GEO 37/2020.
It is of relevance to refer also to other entities engaged in crediting activity, which are not deemed as creditors in accordance with the provisions of GEO 37/2020, such as real estate developers granting credits in their capacity as non-financial creditors pursuant to Government Emergency Ordinance 52/2016 on credit agreements for consumers relating to immovable property, amending and supplementing Government Emergency Ordinance No. 50/2010 on credit agreements for consumers (for more information regarding the Real Estate sector in the context of the novel coronavirus pandemic, click here).
The suspension may be requested by various categories of debtors, such as individuals, authorized natural persons (in Romanian, “persoane fizice autorizate”), individual undertakings (in Romanian, “întreprinderi individuale”), family undertakings (in Romanian, “întreprinderi familiale”), individuals exercising liberal professions or certain professions regulated under special laws, and legal entities (except for credit institutions). Nevertheless, the moratorium may be requested only by debtors who experienced a direct or indirect decrease of their revenues due to the situation generated by the Covid-19 pandemic (such circumstance being attested in an affidavit issued in this respect accordingly) and for which it is impossible to comply with credit payment obligations.
In addition, in order to request the suspension, legal entities must also meet certain conditions:
- their operation is totally or partially interrupted for the duration of the emergency state as a result of the decisions issued by the competent public authorities, according to the law, and they have obtained the Certificate regarding the State of Emergency (the “CSE”) issued by the Ministry of Economy, Energy and Business Environment ascertaining (under the debtors’ own statement) a decrease in their revenues or incomes by at least 25% in March 2020 compared to the average mean of the months of January and February 2020, or the partial or total suspension of their activities as an effect of the decisions issued by the competent public authorities (for more information on how the CSE can be obtained, click here), and
- they are not subject to insolvency procedures at the date of the suspension request, pursuant to the information available on the Trade Registry’s webpage.
III. Conditions regarding the agreements
The measure can be applied only for credit and financial leasing agreements concluded before the date when GEO 37/2020 came into force and which: (i) have not reached maturity, (ii) did not have any overdue payments on the date of the establishment of the state of emergency in Romania (i.e. 16 March 2020) or such amounts have been paid until the date of the request to suspend the payment obligation, and (iii) have not been accelerated by the creditor before 30 March 2020.
IV. Legal effects. Capitalisation of interest. State guarantee
The suspension may be requested for periods of up to nine months (however no later than until 31 December 2020), while credit maturity may be extended by a term equal to the period of suspension.
The interest accrued corresponding to the due amounts for which payment is suspended shall be capitalized on the existing credit balance at the end of the suspension period. The capital thus increased shall be paid in instalments for the remaining period until maturity of the new postponed loan, after the period of suspension. However, by way of exception with respect to mortgage credits concluded with individuals, the accrued interest for the suspension term shall be calculated according to the credit agreement and represents a distinct receivable, bearing 0% interest and payable in 60 monthly instalments starting from the first month after the end of the suspension period.
The payment of the interest due with respect to mortgage credits by individuals for the period during which the payment of instalments was postponed will be guaranteed by the Romanian state through the National Credit Guarantee Fund for Small and Medium-sized Enterprises (the “FNGCIMM”). After a payment is made by FNGCIMM pursuant to the aforementioned guarantee, such payment shall become a budgetary receivable against the respective individual and will be recovered by the National Agency for Fiscal Administration.
V. Procedural aspects
In order to benefit from the suspension measures, debtors must send creditors a request within 45 days as of the entry into force of GEO 37/2020. The regulations provide the creditor’s obligation to asses upon such requests, verify if the conditions for granting the suspension are met and communicate its decision of approval or rejection within maximum 15 days upon receiving the request. However, one may note that the legal provisions do not clarify or define the extent of discretion the creditors have when making assessments on the approval of suspension requests.
Despite the fact that the amendment of credit agreements according to the provisions of GEO 37/2020 operates ope legis (the conclusion of addenda not being necessary), within 30 days upon receiving a request, the creditor must notify the debtor with respect to the contractual clauses modified for the implementation of GEO 37/2020. However, the extension of the contractual term shall be considered effective as of the date when the suspension requests approved by the creditors have been communicated.
All guarantees related to the credit agreement are maintained. The amendment of the contractual clauses extends ipso jure to any co-debtors, guarantors, including personal guarantors, who have guaranteed the debtor’s obligation, as well as any other parties of the credit agreement thus amended, however only with their prior consent. From a practical perspective, this may raise a number of issues especially in case of complex guarantee structures.
Our dedicated team of attorneys & consultants may provide you with all the required assistance, in the context of the state of emergency in Romania. Please do not hesitate to contact us for any aspects in connection thereof.
Cristian Cepeși, Senior Associate (firstname.lastname@example.org)
Landline: 0040 21 202 59 00; Mobile: 0040 758 699 346