EBA reactivates relief measures for pandemic-hit banks, Reuters

This was done without triggering a big surge in provisioning that would crimp the flow of credit. According to The European Banking Authority (EBA), due to the second wave of COVID-19 infections, guidance for banks that expired on 30 September was being reactivated until the end of March 2021. As the first set of lockdowns from March closed businesses, banks began granting payment holidays on company loans, mortgages, and other types of credit. Loans totalling 871 billion EUR (USD 1.05 trillion) had benefited from the relief measures by June 2020.

Without guidance originally introduced by EBA in April 2020, banks would have been required to start automatically provisioning for loans not being repaid 90 days after the due date, making them less likely to keep lending to the COVID-hit economy. EBA informed that even those who couldn’t previously benefit can apply the measures, although the regulator had introduced two constraints to ensure that problem loans were being recognised by lenders in some way.

Loans could only benefit from a repayment holiday for nine months in total and banks must spell out plans for assessing whether loans subject to payment holiday were likely to default, according to Eba, cited by Reuters.