Private moratorium on loans to banks in Bulgaria

Breaking Legal Newsletter (12 April 2020)

On 10 April 2020 the Bulgarian National Bank announced the long-awaited rules for deferral and settlement of credit obligations of individuals and legal entities towards banks and their subsidiaries in relation to the state of emergency declared on 13 March 2020 in Bulgaria.

The established rules constitute a private moratorium within the meaning of the Guidelines of the European Banking Authority as of February 2020 on the legislative and private moratoria on credit payments related to the COVID-19 pandemic, approved by the Bulgarian National Bank on 3 April 2020.

The commercial banks that will apply the rules for deferral of credit obligations, must explicitly inform the Bulgarian Banking Association in writing and must announce publicly the offered reliefs on their website, at their bank premises and in any other way they find appropriate (e.g. via SMSs, through their e-banking platforms, etc.). The notification must specify the rules, which the bank will follow to renegotiate and/or defer the obligations and the starting point from which the rules will apply.

The borrowers must meet several conditions:

(i) experience now or expect difficulties in repaying their obligations due to the COVID-19 pandemic and the limitations under the Emergency Measures and Actions Act as well as the consequences coming from them;

(ii) the credit obligations must have been regularly serviced or with a default of no more than 90 days by 1 March 2020;

(iii) the clients have to state explicitly to the servicing bank that they wish to benefit from the offered reliefs no later than 22 June 2020. The Bank is required to respond  by 30 June 2020 at the latest.

The private moratorium provides opportunity for amendments in the repayment schedules without changing the basic credit parameters. The borrower’s request may cover unpaid instalments prior the submission of the request, as well as instalments, which have not matured yet. The credit obligations may be deferred for up to 6 months but not later than l 31 December 2020. 

Three mechanisms are envisaged:

(i) deferral of principal and interest on the loan for up to 6 months;

(ii) deferral only of the principal of the loan for up to 6 months;

(iii) a mechanism specifically applicable to revolving products

The bank and customers must agree on the specific mechanism. The client has the opportunity to cancel the grace period earlier than initially foreseen and to request an update of the repayment plan.

Banks may negotiate with their clients individual deferral or relief schemes other than those described above. In such cases, banks will not be able to benefit from the temporary principle introduced by the approved moratorium and compliant with the Guidelines of the European Banking Authority that deferral or relief does not lead to reclassification of exposures in the form of restructuring or default.

BNB will publish list with the banks that have announced that they will apply the private moratorium. For your convinience, you can use the direct link to the full text of the order for deferral and settlement of credit obligations on the BNB website (in Bulgarian).

Deloitte Legal Law Firm remains at your disposal for further information and questions. Deloitte Legal Law emergency contacts:  

  • Attorney-at-law Reneta Petkova - Managing Partner, Banking and Finance, email:    
  • Attorney-at-law Georgi Simeonov – Director, Tax practice, email: 
  • Attorney-at-law Zvezdelina Filova - Senior Manager, Labour and Commercial Disputes, email:  
  • Attorney-at-law Miglena Micheva - Manager, Labour Law, email: 
  • Attorney-at-law Kaloyan Yordanov - Manager, Commercial and Corporate Law, email:   
  • Attorney-at-law Adelina Mitkova - Manager, Banking and Finance, email:   
  • Attorney-at-law Pavlin Stoyanoff - Manager, Energy and Resources, email:  
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