Update on liquidity measures introduced in Malta
17 April 2020
This page summarises the key measures introduced in Malta to support businesses with short term liquidity needs resulting from COVID-19.
€350m Government Guarantee from Malta Development Bank (MDB)
Banks across Malta are being given a government guarantee for new working capital loans advanced to clients.
The MDB will guarantee:
- Up to 90% of losses on any individual loan; but
- Limited to maximum 45% of total loans advanced by the bank under the MDB scheme
Result of guarantee
This will reduce the risk shouldered by banks and therefore incentivise banks to be more open at lending to impacted companies.
The added security of the guarantee is expected to lead to at least 1.0% reduction in interest rates. MDB already noted that BOV expects average interest rates under the scheme to be 2.5% lower than normal.
Due to the 45% maximum guarantee, the €350m guarantee translates to a maximum €777.8m of new loans issued under the guarantee scheme.
Banks can advance SME’s up to €2m under the scheme. If the company can prove that it requires more liquidity, then it can borrow up to a maximum of €10m, subject to prior approval from the MDB.
Banks can advance Large Enterprises up to €5m under the scheme. If the company can prove that it requires more liquidity, then it can borrow up to a maximum of €25m, subject to prior approval from the MDB.
Loans should not exceed 2x payroll costs reported in 2019 or 25% of turnover. However, the MDB has the discretion to waive this restriction if the company proves that the funds are required to support liquidity for the next 18 months in the case of SMEs and 12 months in the case of large enterprises.
Loans shall be for at least 18 months, up to max 48 months. A minimum moratorium on interest and principal of 6 months shall apply.
Funding is available for companies registered and operating in Malta.
How to apply
Companies should approach the Maltese commercial banks to take advantage of the scheme (not the MDB).
Applications will be assessed on a case by case basis and the respective commercial bank will take the final decision on whether to advance a loan or not.
Applications are open until the end of 2020.
To date only BOV has finalised a service level agreement with the MDB.
However, the MDB is in ongoing discussions with other banks and are expected to conclude negotiations within the coming week. List of approved intermediaries will be made available on MDB website.
More information from the Malta Development Bank website.
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Moratoria on credit facilities
The Central Bank of Malta has issued guidance to the banks to accept requests for moratoria made by clients.
The moratoria applies for both interest and principal, and shall apply for a period of 6 months. Borrowers can opt for only a principal moratoria if they prefer.
Borrowers must apply with their bank before 30 June 2020.
Borrowers must not have been in default prior to 1 March 2020 (loans from 1 April are not eligible for this moratoria).
The term of the loan shall be extended by the length of the moratoria.
2.5% interest rate subsidy by Government
At a press conference on 15 April 2020, Parliamentary Secretary Clayton Bartolo announced Government would be subsidise 2.5% of interest rates due in the first two years for any new loan facilities companies apply for before the end of June 2020.
This is over and above the MDB guarantee scheme. Accordingly, borrowers are expected to benefit from a further 2.5% interest rate reduction over the already incentivised interest rate on the MDB scheme.
Participating banks for this latest initiative are Bank of Valletta, HSBC, APS Bank, MeDirect, BNF Bank, Lombard Bank, Isola Bank, and FCM Bank.