Message from the Executive Board of the Association of Banks in Bulgaria
The Procedure for Deferral and Settlement of Liabilities Payable to Banks and their Subsidiaries – Financial Institutions in relation to the state of emergency enforced by the National Assembly on 13 March 2020 as a result of the COVID-19 pandemic /Procedure for deferral/ approved on the 10th of April, 2020 by the BNB and already implemented by the banks in Bulgaria does not in any way suppose or allow changes in the terms of the contracts with the clients that lead to a change in the agreed interest rate. Such modification of the contractual terms is also not permitted under the European Banking Authority Guidelines (EBA/GL/2020/02) on deferrals of credit that will be eligible for regulatory treatment favorable to banks in their reporting.
The only thing settled in the Procedure for deferral is the possibility, at the client’s request, the contract be extended with the appropriate time for rescheduling the interest and the principal, or only the principal of the loan, depending on the client’s choice.
We consider as incorrect and misleading dissemination of allegations of that kind that are not true and create unwarranted concern for the borrowers who have or will need to take the opportunity to defer their liabilities under the terms and conditions set out in that document /Procedure for deferral/.
We would like to note that the Procedure for deferral and settlement of liabilities is approved for applying by the banks and their subsidiaries. In specific cases of borrowers from other financial institutions /non-bank companies for fast loans / subject to different deferral procedure than the adopted by the banking community, they should not be commented on as a banking practice in no way.
Within the first three days of the implementation of the Procedure for deferral by banks and their subsidiaries, we have unofficial information that more than 20,000 citizens and companies have declared a desire to benefit from the loan repayment relief measures.
We would like to emphasize that any other measures and mechanisms adopted by the state to support citizens and businesses, including the granting of new loans or such measures related to assistance in servicing already existing state-backed credit obligations, are completely different from the described way to relieve debtors. The banks in Bulgaria, as well as their association – the ABB, do not determine the terms of government measures and mechanisms and they are not dependent on the decisions of the credit institutions.