Against the backdrop of the COVID-19 outbreak, on 13th April 2020 the Government of Malta promulgated the Moratorium on Credit Facilities in Exceptional Circumstances Regulations (the "Regulations").
The main scope of the Regulations is to regulate the provision of a moratorium by credit and financial institutions on credit facilities with the aim of supporting economically vulnerable persons who have been materially affected by the COVID-19 pandemic.
The Regulations mandate credit and financial institutions, licensed under the Banking Act (Cap. 371 of the Laws of Malta) and under the Financial Institutions Act (Cap. 376 of the Laws of Malta) respectively, to grant a six-month moratorium on capital and interest to borrowers with respect to credit facilities satisfying the eligibility criteria set by the Central Bank of Malta in a Directive (the "Directive"), which Directive also delves into other conditions related to the implementation of the Regulations.
The Directive's scope extends to all retail and non-retail clients, including non-financial corporates, micro, small and medium-sized enterprises, self-employed, persons in employment and households, (but excluding other credit or financial institutions), who were meeting their commitments prior to 1 March 2020. This shall apply to business and personal facilities alike and the moratorium shall be granted subject to a number of conditions being fulfilled such as, for instance, that one must not be in arrears with the repayment of any facility prior to 1st March 2020, one must produce evidence that their earnings have been or will be materially distressed by the pandemic in such a way that impairs their commitment to facility repayments and furthermore, the moratorium does not apply to new credit facilities sanctioned after the 13th April 2020. Foreign banks fall within the scope of the Directive if they have a branch, agency or office in Malta.
Increased payments after the moratorium could be agreed between the relevant institution and the borrower. Specifically in relation to individuals, the suspended capital and/or interest payments during the period of the moratorium on a credit facility to natural persons for the purchase of real estate, consumer and other personal credit, shall be spread evenly throughout the remaining term of such credit facility after the end of the moratorium period in cases where the existing duration of the credit facility coincides with the retirement age of the applicant.
The Directive imposes an obligation on credit and financial institutions to take all necessary measures to inform applicants on the decision on the application for the moratorium within ten working days, with the six-month moratorium period to start with effect from the date of approval of the application. The moratorium does not affect other conditions of the credit facility, particularly the interest rate.
How can we help?
We are constantly monitoring developments in this regard and will provide updates as more information becomes available. Meanwhile, should you require any assistance relative to the Regulations and the Directive, or indeed any other COVID-19 related measure put in place by the Maltese authorities, please do not hesitate to reach out to us personally.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
