NBR clarifications for banks and non-banking financial institutions in the context of COVID-19

In the context of establishing the state of emergency, as well as announcing measures to support certain categories affected by the related measures, the Supervisory Committee of the National Bank of Romania (the “NBR“) issued, through a press release dated 24 March 2020, certain clarifications regarding the interpretation and application of the regulations in force, for the purpose of supporting clients of the banks and non-banking financial institutions  in the context of the Covid-19 pandemic.

The main aspects of the press release are:

  1. The payment delays, as a result of Covid-19 pandemic, will not generate the reclassification of the loan nor the obligation of the bank to set up the related provisions for the due amounts. Similarly, neither the non-banking financial institutions (the “NBFIs”) registered with the General Register will have the obligation to set up credit risk provisions in case of restructuring of loans in this context. In addition, for NBFIs registered with the Special Register, the restructuring of the loans will not entail their reclassification into a lower risk category (which would have attracted the provisioning obligation). We note that the NBR considers that these payment delays situations are not associated with the notion of financial difficulty of the borrower, thus they will not be considered as restructuring measures which are likely to generate these obligations;
  2. The payment delays negotiated on an individual basis, not related to the situation of the Covid-19 pandemic, must be classified as restructuring;
  3. Credit institutions are allowed to temporarily use the capital buffers constituted so far under the prudential regulations, until such date which will subsequently be communicated by the NBR;
  4. In addition, credit institutions are granted perimission not to comply with the minimum liquidity ratio, in order to ensure the increased liquidity demand during this period;
  5. With respect to the NBIFs registered with the Special Register, in the light of the capital adequacy requirements concerning, the temporary non-compliance with the applicable credit exposure limits, to the extent that it is generated by the application of measures to support debtors or to stimulate lending in the context of the Covid-19 pandemic, is considered by the NBR a duly justified exceptional case. The affected NBFIs shall notify the NBR in order to agree on new deadline for complying with the prudential levels;
  6. The NBR will cooperate with public authorities to ensure that the governmental support under the form of guarantees for credit support (we understand this may be the one provided by GEO no. 29/2020 – for details in this regard, you can access our article State guarantees and interest subsidies for investments and loans / working capital credit lines) will conform to the applicable prudential conditions in order to reduce capital requirements, with the consequence of increasing the financing potential;
  7. Credit institutions must continue to evaluate the quality of all credit exposures in order to identify the warning signals of unlikeliness to pay, and the NBR will permanently evaluate, in its turn, the situation of each bank and, depending on the evolution of the impact generated by the Covid-19 pandemic, will take the necessary measures.

The full text of the NBR press release is available at the following address: https://www.bnr.ro/page.aspx?prid=17656

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