On 7 April 2020, the Chamber of Deputies of the Czech Parliament approved a bill on certain measures in the area of repayment of loans in connection with the Covid-19 pandemic. The bill was sent to the Senate on 8 April 2020, which approved it on 16 April 2020.
The bill allows banks’ clients, as well as clients of other firms, to apply for a protection period (moratorium) during which the client will not be repaying its obligations. The client may select the length of the moratorium either until 31 July 2020 or until 31 October 2020. If a client applies for this moratorium, then the repayment period of the loan is extended by the length of the moratorium, and also the validity of collateral is extended by the same period.
The moratorium shall not be used for loans that are more than 30 days overdue as at 26 March 2020.
In order to compensate lenders for the extended period of the loan repayment, lenders will receive interest covering the moratorium period. However, the interest is limited for consumers to a maximum calculated as a sum of the repo rate and 8 percentage points, unless a lower interest has been agreed. For entrepreneurs, the interest equals to the one agreed in the loan contract.
The moratorium is not recorded in the credit registers as negative information.
On 31 March 2020, the EBA issued 3 statements (EBA statements) clarifying measures to mitigate the impact of Covid-19 on the EU banking sector:
The EBA expresses its support for the measures taken to date to ensure that banks maintain a sound level of capital and provide the necessary support to economies. The EBA also emphasizes that the capital relief resulting from the measures taken by the competent authorities in response to the Covid-19 crisis is to be used to finance the corporate and household sectors, not to increase the distribution of dividends or make share buybacks.
The EBA urges all banks to refrain from dividends distributions and share buybacks, which results in a capital distribution outside the banking system, to ensure robust capitalisation.
EBA further calls on national supervisors to ask banks to review their internal remuneration policies so that they are consistent with and promote sound and effective risk management reflecting the current economic situation.
Remuneration, and in particular its variable component, should be set at a conservative level with a larger part of the variable remuneration being deferred for a longer period and a larger proportion being paid out in equity instruments.
The EBA recognizes that banks may face a number of difficulties in relation to the outbreak of the Covid-19 pandemic. The EBA is of the opinion that banks should focus on monitoring and evaluating the effects of the pandemic and ensure the continuity of their activities. However, market participants, supervisors and resolution authorities should have access to reliable information about banks to assess their financial situation.
The competent authorities should assess to what extent a delayed submission of regulatory reports is justified. For the time being, any supervisory actions in this respect should only relate to submissions due between March and end of May 2020.
The EBA states that banks should be given one additional month to submit required regulatory reports with the exception of:
However, the EBA does not anticipate postponing the transition to a new version of the reporting framework that is ready to be implemented with effect from reporting as at 31. 3. 2020 (reporting version 2.9).
The EBA announced its decision to cancel the Quantitative Impact Study based on June 2020 data which monitors the impact of Basel III rules on EU banks.
With regard to disclosure, the EBA encourages supervisors to be flexible in assessing banks' compliance with Pillar 3 disclosure deadlines. Where institutions reasonably expect a delay in disclosure, they should inform supervisors and market participants of the delay, the reasons for such delay and the estimated publication date.
At the same time, supervisors and banks should assess the need to disclose additional information under Pillar 3 that may be necessary for the proper presentation of banks' risk profile.
The EBA reminds banks that it remains important to continue to put in place and maintain effective systems and control mechanisms to ensure that the EU’s financial system is not abused for money laundering or terrorist financing. According to the EBA, the experience from the past crises suggests that new money laundering techniques and channels are likely to emerge.
On 2 April 2020, the EBA published its guidelines on legislative and non-legislative moratoriums on loan repayments, which are being applied in EU countries in connection with the Covid-19 pandemic (EBA GL on moratoria).
Where the adopted moratorium meets the conditions set out in the guidelines, institutions should count the days past due for the purpose of determining the default in accordance with Article 178 of CRR on the basis of the repayment schedule adjusted for the payment moratorium.
The moratorium should, for example, meet the following conditions:
Throughout the moratorium, banks should continue assessing the potential unlikeliness to pay of debtors subject to the moratorium.
In the assessment of unlikeliness to pay of individual debtors following the end of the moratorium, banks should primarily take into account the following cases:
CNB Official Communication on the Publication of Information pursuant to CRR and Decree No. 163/2014
On 8 April 2020, the Czech National Bank (CNB) published its official communication on the publication of information pursuant to the CRR and Decree No. 163/2014 (CNB communication).
In its communication, the CNB follows the EBA's statements on the supervisory reporting and disclosure under Pillar 3 and informs regulated entities that it is prepared to accept if a regulated entity discloses information pursuant to CRR and Decree No. 163/2014 as follows:
Where regulated entities expect a delay in disclosure, the CNB calls upon these entities to inform market participants of this fact, the reasons for the delay and the expected publication date.
On 27 March 2020, the Basel Committee on Banking Supervision (BCBS) published a press release on the decision to postpone the implementation of BASEL III outstanding standards in order to increase the operational capacity of banks to deal with the effects of the Covid-19 pandemic (BCBS decision).
The measures approved by BCBS include the following changes in the Basel III implementation schedule:
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