The coronavirus outbreak, together with the necessary reactive measures being imposed by states worldwide, have negatively impacted the global economy on an unprecedented and exceptional level. In response to the resulting adverse effects being felt by the Maltese economy, on the 13th April 2020 the Government of Malta issued the Moratorium on Credit facilities in Exceptional Circumstances Regulations, 2020 (the “Regulations”) by virtue of Legal Notice 142 of 2020. The scope of the Regulations is to support economically vulnerable persons who have been materially affected by the coronavirus outbreak by regulating the provision of a moratorium on credit facilities by credit and financial institutions.
The Regulations require credit and financial institutions to grant a moratorium for a period of six months on capital and interest payments on all credit facilities advanced by such institutions to borrowers that have been materially affected by the Covid-19 outbreak, subject to the satisfaction of the eligibility criteria as set out in Directive 18 issued by the Central Bank of Malta (the “Directive”) in accordance with the provisions of the Regulations. This means that eligible applicants (as set out below) may apply to their respective credit or financial institutions for a six-month deferral of payments of capital and interest from credit facilities obtained from such institutions. The moratorium shall effectively constitute a change in the schedule of payments, whereby the duration of the credit facility is extended in accordance with the length of the moratorium period. However, the borrower and the respective institution are permitted to agree to increased payments after the moratorium.
The Regulations apply to all credit and financial institutions licensed by the MFSA under the Banking Act (Chapter 371 of the Laws of Malta) and the Financial Institutions Act (Chapter 376 of the Laws of Malta) respectively, and also include any branch, agency or office in Malta of a bank or credit institution not incorporated in Malta. The moratorium does not apply to credit facilities made to other credit and financial institutions. Moreover, moratoria granted to borrowers prior to the 13th April 2020 are excluded from eligibility, however, such borrowers are not precluded from re-negotiating the conditions of any such moratoria previously agreed to, in line with the conditions stipulated under the Directive.
The Directive sets out that all retail and non-retail clients including non-financial corporates, micro, small and medium sized enterprises, self-employed, persons in employment and households, who, prior to the 1st March 2020 were not in arrears and were fully meeting their commitments in respect of their credit facilities, are considered to be eligible applicants for the moratorium, provided that they meet the following criteria:
– They are not subject to a forbearance arrangement with the relevant credit or financial institution or, in such a case, they have met all terms and conditions agreed upon thereto;
– They are not in arrears with the repayment of the credit facility;
– They can provide sufficient evidence to the satisfaction of the relevant credit or financial institution which proves that their income has been or will be materially affected by the coronavirus outbreak in such a way that adherence to the applicable credit facility commitments in part or in full is temporarily impaired; and
– The credit facility in question was sanctioned prior to the 13th April 2020.
Applications for a moratorium in terms of the Regulations are to be decided on a case by case basis and are to be voluntarily submitted to the relevant credit or financial institutions by eligible borrowers at any time from the coming into force of the Regulations up until the 30th June 2020. The Directive stipulates that any such credit or financial institutions are to take all necessary measures to inform applicants on the decision on the moratorium application within ten working days. Furthermore, the six-month period of the moratoria shall commence from the date of approval of the relevant application. It is also worth noting that the six-month moratorium period and the application deadline may be extended by the Minister responsible for public health following prior consultation with the Minister of Finance and Financial Services.
Finally, the Regulations empower the Central Bank of Malta to issue, amend and revoke any directives as may be required in respect of the provisions of the Regulations and to impose administrative penalties and measures on credit or financial institutions falling within the ambit of the Regulations which fail to comply with the provisions thereof, or of any directive that may be issued thereunder.