Obligations subject to moratorium
Less than a month after the expiry of the first COVID-19-related moratorium on corporate and retail debt, to Serbian banks and financial leasing companies, the National Bank of Serbia has imposed a new moratorium on payment obligations owed to banks under banking products (such as loans, overdrafts, credit cards, hedge instruments such as interest rate swaps, and bank guarantees) and financial leasing companies.
The moratorium does not apply to payment obligations arising under banking services such as payment transactions (e.g. transaction processing fees, account maintenance fees), investment services, brokerage-dealership services or safe deposits.
Duration of the moratorium
The new moratorium applies to obligations that become due between 1 August and 30 September 2020, as well as to debt which became due during July 2020 and has not been settled.
The moratorium will again operate on an opt-out basis. Banks and financial leasing operators are obliged to publish a moratorium offer on their respective websites by 31 July 2020. The offer will be deemed accepted by the clients unless expressly rejected until 10 August 2020. Those who reject the offer will be obliged to continue to settle their debts notwithstanding the moratorium. Client can reject moratorium offer with respect to all of its obligations encompassed by the moratorium, or selectively with respect to a particular loan or other product.
Clients who do not opt-out from the moratorium and thus become automatically subject to its effects can drop out from the moratorium at any time by submitting to their bank/financial leasing provider a cancellation request or by simply paying the obligation that becomes due during the moratorium.
The repayment period is prolonged for the duration of the moratorium. Following the expiration of the moratorium, banks and financial leasing companies will have an obligation to deliver to the clients new prolonged repayment plans, with interest accrued during the moratorium spread over the repayment period (see below). The clients will then have an option to: (i) continue to service the debt according to the new repayment plan; (ii) settle the entire debt (principal and interest) that became due during the moratorium; (iii) settle the interest that accrued during the moratorium, while acceding to the new repayment plan with respect to the principal.
Banks and financial leasing companies cannot take enforcement action during the moratorium.
Calculation of interest during the moratorium
During the moratorium, contractual interest on corporate loans and corporate financial leasing products can be calculated on the entire outstanding obligation, including the portion that becomes due during the moratorium. Such interest cannot be capitalized but is spread equally over the remaining repayment period, which is prolonged for the duration of moratorium. With respect to retail products, banks and financial leasing companies can calculate contractual interest during the moratorium on the outstanding obligation, according to the repayment plan valid prior to the moratorium, excluding the portion of the obligation that becomes due during the moratorium.
During the moratorium, default interest does not accrue. Default interest calculated during the moratorium on the debt that had become due and remained unpaid prior to the commencement of the moratorium cannot be capitalized but is equally spread over the remaining repayment period.
Repayment upon termination of the moratorium
Upon termination of the moratorium, the bank/financial lessor will inform the borrower/financial lessee via e-mail or regular post of a new repayment plan, extended for the duration of the moratorium. However, the debtor may, within 7 days, request to settle:
- all obligations covered by the moratorium (all annuities from the moratorium period – principal and regular interest); or
- all obligations based on regular interest calculated during the moratorium, with the loan repayment period extended for the duration of the moratorium.
Overdrafts and credit card debts
During the moratorium, the banks will charge regular (agreed) interest on the used amount of overdraft and credit card debts, while the validity of the overdrafts and credit cards will be extended for the duration of the moratorium.
Standing orders and administrative bans
For the benefit of debtors who will opt to use the moratorium, as of 28 July 2020, banks will suspend payments of debtors’ obligations covered by the moratorium on all standing orders (deactivate standing orders) until the debtor notifies the bank that it has rejected the moratorium.
Also, as of 28 July 2020, employers and the Republic Pension and Disability Insurance Fund will suspend the transfers of funds of debtors who settle their obligations through an administrative ban to the accounts of banks/financial lessors until the bank/financial lessor notifies them that the debtor has refused the moratorium. NBS has pointed out that employers are allowed to transfer funds even before such notification if the employees informs them that they will reject the moratorium.
In both cases, debtors who decide not to use the moratorium or who decide to cancel the moratorium before its termination will not face any negative consequences.