Dáil Éireann Debate, Tuesday - 22 September 2020
239. Deputy Christopher O'Sullivan asked the Minister for Finance if he has considered extending the loan moratorium and forbearance initiatives for businesses that are unable to meet current debt obligations. [24846/20]
View answerLast March in response to the Covid-19 crisis, the Banking and Payments Federation of Ireland (BPFI) and its members announced a 3-month payment break would be made available for their customers, including SMEs. Following the initial payment break a further 3-month extension was announced by BPFI. As such, the Deputy should note that these payment breaks were introduced on a voluntary basis and were not done so on a statutory basis.
As a result of COVID-19, the outlook remains uncertain for corporate, SME and household borrowers. Alongside other schemes and supports, payment breaks continue to support these borrowers. However, it should be noted that there has been a material reduction in the value of outstanding or active payment breaks, and those customers whose financial circumstances have normalised will return to making full payments.
The Central Bank is focused on ensuring that extensions to COVID-19 related payment breaks operate in borrowers’ best interests and in line with regulatory requirements. The Central Bank has clearly communicated and agreed with the Banking and Payments Federation of Ireland that it expects that at the end of the agreed payment break that borrowers who can return to full repayments be given, at the minimum, the option to either repay the loan within the remaining term or extend the term of the loan, without penalties noting that borrower circumstances and the appropriateness of each option may differ.
I encourage all borrowers who continue to experience financial distress to engage as early as possible with their lenders. Borrowers have a suite of regulatory protections and lenders have specific obligations to support borrowers. Borrowers should consider what they can pay and should be cautious about accruing significant amounts of arrears where it is not necessary.
For some borrowers temporary additional supports may be the answer initially, while for others the more appropriate and sustainable option will be deeper restructuring. Over the longer term, restructuring arrangements put in place must be appropriate and sustainable in the customers’ long-term interest in all cases.
Lenders must engage with borrowers to identify an appropriate and sustainable solutions. They should use the full suite of restructuring solutions available to them including short-term forbearance (such as reduced payments). Borrower circumstances differ, so the right solution for each borrower differs too.
The Central Bank of Ireland has a number of measures in place to specifically protect and support the interests of businesses. Banks must follow regulations set out in the Central Bank’s Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-sized Enterprises) Regulations 2015 (the SME Regulations).
The SME Regulations https://centralbank.ie/news/article/regulations-for-firms-lending-to-smes-from-2016 set out the required treatment of SMEs by regulated entities in relation to various aspects of business lending. This includes detailed provisions around the credit application process, requirements regarding security or collateral, credit refusals and withdrawals, handling complaints, managing arrears and having in place policies for engaging with SMEs in financial difficulty.
