1. MORATORIUMS ON LOAN REPAYMENTS: WHAT DOES THE NEW ROYAL DECREE-LAW ESTABLISH?
Royal Decree-Law 3/2021 (the "RDL") published in today's official gazette (BOE) introduces certain modifications to the moratorium regime on the payment of debts.
- (a) On the one hand, it extends to 30 March 2021 (inclusive) the deadline for requesting a moratorium and,
- (b) On the other hand, it limits to 9 months the total period for which they can be applied.
2. WHAT MORATORIA DOES IT REFER TO?
During 2020, in an effort to alleviate the negative effects of the lack of liquidity caused by the COVID-19 preventive measures, the government passed a series of Royal Decree-Laws which set out the following debt payment moratoria:
- (a) A legal moratorium of three months on the payment of principal and interest on mortgage and non-mortgage loans (Royal Decree-Law 8/2020 and Royal Decree-Law 11/2020) , which had to be requested from the lender for it to apply, and which was granted in favour of families and self-employed persons in a situation of economic vulnerability (as defined in Article 16 of Royal Decree-Law 11/2020 of 31 March).
- (b) Another legal moratorium in favour of operators in certain economic sectors that had particularly suffered the effects of the crisis (ie. the tourism sector, moratoria of a maximum of 12 months set out in in Royal Decree-Law 25/2020 of 3 July and for the transport sector set out in Royal Decree-Law 26/2020 of 7 July with a maximum of 6 months in relation to leasing and renting contracts for their fleet of vehicles).
- (c) Finally, in addition to the legal moratorium, Royal Decree-Law 19/2020 of 26 May established the possibility for debtors and financial institutions to agree on conventional moratoria by means of sector-wide schemes.
These last conventional (i.e. agreed) moratoria were applicable to those persons who, despite having suffered a reduction in income and payment capacity as a result of the COVID-19 crisis, did not meet the requirements to qualify for the moratoria in (a) above, or to those who did do so, but once the maximum period of the legal moratorium had expired.
The existing sector-wide schemes must be notified to the Banco de España and are published on its website (click here). There are four published sectoral agreements, those of the AEB, CECA, ASNEF and UNACC. Initially, all of them established the possibility of granting moratoria of up to 12 months in the case of mortgage loans and 6 months in the case of personal loans (including therein the periods the legal moratorium period).
These conventional moratoria were driven by an agreement of the European Banking Authority ("EBA") which, through its Guideline of 2 April 2020 (EBA/GL/2020/02) allowed credit institutions to give a favourable accounting treatment to the moratoria granted to mitigate the negative effects of COVID-19. The guideline established that, under certain conditions, late payment of debts are not classified as forbearance by financial institutions, thus mitigating the impact on financial institutions of the moratoria granted and therefore encouraging their granting. The guidelines applied to moratoria granted until 30 September 2020, after which date the EBA suspended the application of the regime.
In December 2020, with the arrival of the second wave of COVID-19, the EBA opted to amend its guidelines to re-establish this accounting treatment for moratoria granted until 30 March 2021 and to establish a maximum duration of 9 months applicable to all moratoria granted from 30 September 2020 onwards. It is expressly established that those granted prior to such date could maintain the longer duration for which they had been agreed, if applicable, without losing the benefit of the beneficial accounting treatment. Subsequent moratoria, however, could not. They had to be limited to 9 months, there including the period already consumed if any.
3. AND WITH RESPECT TO THESE MORATORIA, WHAT DOES THE ROYAL DECREE LAW ESTABLISH?
The RDL, in line with the EBA guidelines:
- (a) Extends until 30 March 2021 the deadline for applying for a moratorium.
- (b) Establishes that any moratorium granted after September 30 may not have a total duration of more than 9 months, including the terms of both legal and conventional moratoria (see transitional regime below).
- (c) It clarifies that those who can apply for a moratorium until 30 March are only those who have not enjoyed one until now or those who, having done so, have not yet consumed the 9 months. In the latter case, they can apply for a moratorium of up to the number of months remaining to complete 9 months.
In anticipation of new extensions of the deadline by the EBA, the RDL expressly establishes that, in the future, the deadline for moratoria may be extended by order of the Minister for Economic Affairs and Digital Transformation, when so established by the corresponding amendment of the EBA Guidelines.
4. WHO CAN APPLY FOR THE MORATORIUM AND FOR WHICH DEBTS?
All those for whom the 2020 legislation already establishes a right to a legal moratorium, that is:
- (a) vulnerable debtors in accordance with the provisions of Article 16 of Royal Decree-Law 11/2020, of 31 March with respect to the legal moratoria on the payment of mortgage and non-mortgage financing established in Articles 13.3, 14 and 15 of Royal Decree-Law 8/2020, of 17 March (mortgage moratorium), and in Articles 24.2 and 25 of Royal Decree-Law 11/2020, of 31 March (non-mortgage moratorium).
- (b) The beneficiaries of the legal moratoria in the tourism sector and the road passenger transport sector. For them, the extension applies automatically.
It seems, although it is not clear, that the persons who do not meet the requirements for being considered vulnerable debtors but who already had obtained a moratorium in under a sector-wide scheme may also request an extension of the moratorium already in place if it has a duration of less than nine months or a new one if they did not have one in place.
5. WHAT ABOUT THE REST OF THE CONDITIONS?
The rest of the conditions relating to the loans and credits to which the moratorium applies, the procedure for applying for them and the persons who can do so remain unchanged and are those set out in their specific regime.
6. WHAT HAPPENS WITH CONVENTIONAL MORATORIUMS ALREADY AGREED WITH A DURATION OF MORE THAN 9 MONTHS?
In relation to moratoria which had already granted for a duration of more than 9 months, there are two different scenarios depending on when they were granted;
- (a) If they were granted before 30 September 2020, both the RDL and the EBA guidelines allow them to maintain that longer duration whilst also enjoying favourable accounting treatment.
- (b) If they were granted after 30 September, the EBA establishes that their maximum duration must be 9 months, but the RDL establishes a transitional regime according to which those granted between 30 September 2020 and the entry into force of the RDL on 4 February 2021 "shall maintain the conditions and duration for which they were granted at the time".
Given that this does not seem to mean that they are excluded from the possibility of requesting an extension of their term if this had been shorter than 9 months, it seems that what the Spanish legislator wants to do is to maintain any moratoria with a term longer than 9 months that might have been agreed after September 30. It is difficult for this to have happened as the sector-wide schemes limited their validity to 30 September 2020 and the addenda to these published in December, following the December EBA guideline, already limit the maximum term to the 9 months set out in the Guidelines. That said, if there were a moratorium granted between 30 September 2020 and 4 February 202 with a total duration of more than 9 months, this would indeed be permitted by the RDL (and would therefore be binding for the parties).
7. CONCLUSION
The extension of the deadline to apply for moratoria until 30 March 2021 is good news for debtors in vulnerable situations and the maximum limit of the legal and conventional moratorium to 9 months, applicable from 30 September 2020, is certainly good news for economic operators who now enjoy greater legal certainty in relation to their credits.
