Banks can grant a new moratorium on loan repayment for up to 90 days to loan users whose financial situation was negatively affected by the new coronavirus epidemic, the Central Bank of Montenegro (CBCG) decided.
Banks are obliged to publish on their websites by June 1 the detailed conditions for approving the moratorium and how to apply for it, and for the calculation of interest during the moratorium, as well as the further course of loan repayment, banks may not contract a nominal interest rate that is higher than nominal interest rates from the loan agreement to which the moratorium is applied.
The CBCG states that at today's session of the CBCG Council, chaired by Governor Radoje Žugić, the effects of previously adopted measures aimed at reducing the negative effects of the new coronavirus epidemic were considered.
"It was established that the measures of the CBCG made a significant contribution to mitigating the consequences of the new coronavirus on the population and the economy. Through constant meetings of the Council and intensive communication with banks and international financial institutions, the CBCG initiated and implemented significant activities that provided, among other things, additional liquidity in the system. Thus, the introduction of the moratorium, during March, April and May, will increase the liquidity of individuals and legal entities by approx. 150 million euros. In addition, the earlier reduction of the reserve requirement rate that banks are required to deposit with the CBCG by two percentage points increased liquidity of the banking sector by approx. 70 million euros, which directly affected the increase in their credit potential. From the beginning of March to the middle of May, banks approved 6.423 new loans, in the amount of 152,5 million euros. Despite the good liquidity of the banking sector, the CBCG secured a repo line from the Bank for International Settlements (BIS) from Basel in the amount of EUR 100 million," the CBCG stated.
These funds, it is added, would be used to support banks' liquidity in case of unforeseen situations.
"At today's session, the Council adopted a decision establishing temporary measures that allow banks to, in the coming period, continue to provide additional support to those loan users who, due to the new coronavirus epidemic, have had or will have a negative impact on their financial position. in this direction, banks can grant credit restructuring to the aforementioned users, under defined conditions, including cash unsecured loans. Loans restructured in accordance with this decision will be treated as newly approved, and banks will be freed from the additional burden of reservation costs. This creates the conditions for loan restructuring under more favorable conditions. The decision adopted today established that banks can grant a new moratorium on loan repayment for up to 90 days to loan users whose financial situation was negatively affected by the new coronavirus epidemic. Banks are obliged to, by June 1, 2020 , publish on their websites more detailed conditions for approving the moratorium and how to apply for it. "For the calculation of interest during the moratorium, as well as the further course of loan repayment, banks may not agree on a nominal interest rate that is higher than the nominal interest rate from the loan agreement to which the moratorium is applied," the CBCG announced.
They point out that the decision to redefine the principle of a "general" moratorium - when banks are obliged to provide all users who request it with a temporary pause in loan repayments - is based on the analysis of the data of the previous moratorium, the results of which showed that this measure was on a significant scale , used by individuals and legal entities whose liquidity was not threatened due to the epidemic. Also, the CBCG adds, these activities are in line with the recommendations of international financial institutions - the European Banking Agency, the World Bank and others.
"Temporary measures prohibiting the payment of dividends to shareholders remain in force, except for payment in the form of bank shares, as well as the possibility of granting loans to one person or a group of related persons above the exposure limit prescribed by the Law on Banks. Also, the fee that banks are required to pay for using of the prescribed amount of mandatory reserves that are not returned on the same day remains, until further notice, reduced by 50%. The Council also considered the report on the operations of banks for the first quarter of 2020. It was established that the banking sector is characterized by high capitalization, preserved liquidity and a stable level of deposits. The Council of the CBCG recommended to banks that, within their business policies, focus special attention on projects in the field of tourism, as well as projects carried out by micro, small and medium-sized enterprises," the CBCG statement concludes.
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