Date: 30 March, 2020
Subject: Press Release on the Banking Agency of Republika Srpska by-laws regarding the Covid 19 pandemic
In order to adequately inform the public on the measures the Banking Agency of Republika Srpska (hereinafter: Agency) issued by means of by-laws with the objective to mitigate the negative economic consequences caused by the COVID-19 viral disease (hereinafter: Corona virus), and to preserve the stability of the Republika Srpska banking system, and to address the concerns of banks’ and micro-credit organizations’ clients regarding the application of the regulations below, we provide further clarification of the provisions of the adopted regulations.
The Agency, within the scope of its competences, and taking into account the current situation of emergency in Republika Srpska, adopted the following decisions:
- Decision on banks’ temporary measures to mitigate the negative economic consequences caused by the COVID-19 viral disease and
- Decision on micro-credit organizations’ temporary measures to mitigate the negative economic consequences caused by the COVID-19 viral disease.
These regulations define that during the situation of emergency (that is, the state of emergency, if declared by the competent authorities), banks or micro-credit organizations may grant a temporary moratorium to clients for at most the period until the termination of the said state.
This moratorium is approved with the aim that banks, or micro-credit organizations, meanwhile, in consultation with their clients, have time to define the most appropriate special measures to be granted to clients. During the above mentioned moratorium, clients will not pay obligations on the principal and interest accrued during that period, and banks, or micro-credit organizations, will negotiate with clients on how to settle these obligations in the future, depending on the client's ability to repay them. A temporary moratorium may be granted upon the client’s request, and it is allowed that the request, due to the situation of emergency, need not be submitted in writing, that is, it can also be submitted electronically (email, website, SMS and etc.) or the bank, i.e. micro-credit organization may approve the same on its own initiative if it finds that the clients have not been able to submit the request due to technical or other obstacles. Please note that only in the case of a temporary moratorium, due to the situation of emergency, no formal signing of the annex to the loan agreement is required.
During the temporary moratorium, banks, i.e. micro-credit organizations, will negotiate with clients which of the special measures defined by the Agency's by-laws may grant to clients, and it is crucial to define measures that can help clients to settle their obligations to the bank in the future period. Special measures (or a combination of special measures) that banks or micro-credit organizations may approve to the clients are as follows:
- moratorium, i.e. deferral of repayment of loan obligations for a maximum period of 6 months,
- grace period for repayment of the principal of credit obligations in case of loans which are being repaid in installments for a maximum period of 6 months (during the grace period, the client pays interest accrued, but not the principal),
- extension of the maturity for repayment of annuity loans,
- extension of the maturity of one-off loans, including revolving loans, overdrafts on transaction accounts, credit cards and similar, for a maximum period of 6 months, whereby clients during that period could also use part of the exposure that was not used on the day of modification,
- approving an additional amount of exposure to overcome its current liquidity difficulties,
- other measures aimed at facilitating the settlement of the client's credit obligations and maintaining the client's business operations.
Clients will be required to sign an annex to the loan agreement for the purpose of approving the abovementioned special measures, and therefore the prior consent of guarantors or co-borrowers is required.
We particularly emphasize that the right to approval of special measures issued by a bank or micro-credit organization is only granted to clients whose creditworthiness has been deteriorated, or whose repayment sources have been reduced and thus who are prevented or will be prevented from settling their obligations to the bank, due to the negative impact caused by the pandemic of corona virus.
Therefore, the right to special measures can be exercised only by clients who are directly or indirectly (e.g. in the case of natural persons, the total household income is observed, that is, if for the client of the bank or micro-credit organization income is not reduced, but the total household income is significantly reduced and that affects the ability to settle obligations to the bank, that is, the micro-credit organization, such clients are considered to have fulfilled the conditions for granting special measures) affected by the negative economic consequences caused by the outbreak of corona virus.
Also, in accordance with the regulations of the Agency, banks and micro-credit organizations are obliged to adopt the Program of special measures to be approved to their clients, and to publish all information on special measures on the official website of the bank or micro-credit organization.
Banking Agency of Republika Srpska