Moratoria on credit facilities
15 April 2020
Credit and financial institutions have been instructed to grant a six-month moratorium on capital and interest to borrowers that have been materially affected by the COVID-19 outbreak following the issue of Legal Notice no. 142 of 2020.
The scope of the moratorium period is to reduce the burden of financial obligation in the event that one’s income has been negatively impacted by the virus. Furthermore, the moratorium does not cancel obligations, but rather postpones them to a later date. Repayment schedules will therefore be extended by the duration of the moratorium period.
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The following eligibility criteria apply:
- Any borrower except for credit or financial institutions.
- Applicable on loan facilities approved prior to 1 March 2020 (excluding credit cards).
- All terms and conditions agreed upon with the credit or financial institution has been met and facility was not in arrears prior to 1 March 2020.
- Borrower must demonstrate that their income has been (or will be) materially impacted by the COVID-19 outbreak and therefore their ability to fully honour debt obligations has been compromised.
- Eligible persons have the option to avail themselves of this moratorium by contacting their respective credit institution. Applications are voluntary and not automatic.
- Applications are to be submitted at any time until 30 June 2020.
- All applications will be reviewed on a case-by-case basis by the respective credit and financial institution, and may be refused if the eligibility criteria set out above is not met.
- Credit and financial institutions have ten working days to make a decision on the application. The moratorium will become effective from the date the application is approved.
- No penalties or administrative fees shall apply on applicants.
- The duration of the moratorium shall be for a period of six months.
- Applicants may either apply for a full deferral of both capital and interest repayments throughout the duration of the moratorium, or for reduced monthly payments but still pay interest.
- The moratorium will not affect other conditions of the credit facility, in particular, the interest rate.
- This does not preclude borrowers from re-negotiating the conditions of moratoria approved prior to 1 March 2020.
In line with European Banking Authority guidance, the application of this moratorium in itself should not lead to reclassification of the exposure as forborne unless an exposure has already been classified as forborne as at 29 February 2020.
Further information is available on the Central Bank of Malta’s website.