BANK OF ALBANIA
Measures undertaken by the Bank of Albania on the rescheduling the instalments of loans
Publication date: 16.03.2020
The start of this week, with the identification of the first cases infected by COVID-19, poses us (that is all actors of the financial market, including supervisors), the need to take measures rapidly and timely, to contain and minimize the possible negative effects, not only for the welfare and health of the public, also for the circulation of both goods and monetary flows in the economic environment.
The first decision of the Government to suspend teaching at educational institutions, followed by measures to avoid the gathering of people, recommendations to work from home, the interruption of a range of trading activities, the increased measures of care to be massively applied, etc., certainly will affect the volume of activity of businesses, and the generating of lower income than expectations.
For these reasons, in the meeting of 12 March 2020, the Supervisory Council of the Bank of Albania approved the temporal amendment of a provision in the regulation on credit risk management from banks and on credit risk management in the activity of non-bank financial institutions and savings and loan associations. This amendment aims to create a facility to these entities that, in case of borrowers’ insolvency during the three-month period, these entities not are subject to the application of the requirements of these regulations that are related primarily to the classification and establishment of provisioning funds.
This decision of the Supervisory Council takes into account the fact that due to the created situation, the slowdown in the activity of economic entities, or the inability of households to move from their homes, may also bring about consequences to their solvency, by creating difficulties to pay their liabilities, particularly during the three-month period, when the virus is expected to peak.
In this way, banks and the above-mentioned institutions will be able to accommodate the needs of clients for a rescheduling the instalments of loans, by not charging them with penalties or worsening of the borrower’s status, because the loan in not paid due to the difficult conditions of these days out of their control.
The measures on rescheduling the instalments of loans enter into force on 13 March 2020 and will be in force till 31 May 2020. These measures stipulates that, during this period, those households and businesses, whose financial positions deteriorates due to the current situation, may benefit a delay, up to three months, of the payment of their loans instalments, that they have taken at the financial institutions which are being granted a license by the Bank of Albania: banks, non-bank financial institutions, and savings and loan associations. At this point, we emphasize that: This is a process which enables only the rescheduling of the liabilities that these borrowers have, but not their granting.
To make this possible, all the borrowers, businesses and households, who are both economically and financially affected by this situations, and who would like to benefit from this offered facility, should contact the financial institution (bank, non-bank financial institution, savings and loan association) with which they have entered into a lending relationship and inform them on this request.
Then, it will be the financial institution (bank, non-bank financial institution, the savings and loan association) which in collaboration with the borrower will assess the request, and based on the specifics of the case, will provide the relevant solution.
Meanwhile, the borrowers, whose solvency is neither affected nor damaged from this situation, should normally continue the payment of their liabilities to these entities.
At the conclusion, the Bank of Albania and the Albanian Association of Banks would like to ensure the public that they remain maximally committed to provide full support that is needed to overcome this difficult situation.