On 30/03/2020, the Minister of Finance exercised its discretion and issued a decree, suspending, upon application to the relevant financial institution, the obligation to pay loan instalments and interest deriving from loans and/or credit facilities granted and/or purchased and/or managed by financial institutions, for a period of 9 months, that is until 31/12/2020 (the «Decree»).
On 07/05/2020, the Minister of Finance issued a new decree amending/ replacing the provisions of article 3 (1) and (2) of the Decree, as follows:
- The obligation to pay loan instalments and interest, deriving from loans and/or credit facilities granted and/or purchased and/or managed by financial institutions, is suspended for a period of 9 months, that is until 31/12/2020.
- The new decree clarifies that the suspension of the loan instalments and interest, also covers loans granted jointly by financial institutions as well as loans concluded in Cyprus governed by foreign law.
- Those eligible to apply for the suspension of the obligation of payment of instalments, are individuals, public law entities, self-employed and companies («Beneficiaries»), who or which as of 29/02/2020 do not present any arrears in the payment of instalments of more than 30 days from the date provided in the existing loan and/or credit facility agreement, but they are now facing financial difficulties, as a result of the consequences of COVID-19.
- It is further clarified that the Beneficiaries, who on the 29/02/2020, were over 30 days late in paying their instalments, but thereafter and until the 30/03/2020, have successfully settled their instalments, to an extent that there are no arrears of more than 30 days on 30/03/2020, they may apply for the suspension of the obligation of payment of instalments and interest, as stipulated in article 3 of the new decree, provided that the total arrears at the time of application, do not exceed the amount of €100 for retail loans and the amount of €500 for business loans.
- The suspension of the obligation of payment of instalments and interest applies from the effective date of the Decree, provided that the Beneficiaries by 26/06/2020, express their interest in writing by email or by post or by fax to the/ /financial institution, as stipulated in the new decree.
- The financial institution does not have the right to reject the submitted expression of interest except if the interest party does not meet the eligibility criteria stipulated in article 3 (2) of the new decree.
- Provided that the criteria of article 3 (2) of the new decree are satisfied, it should be highlighted that the financial institutions shall, taking into consideration the guidelines of the European Banking Authority (EBA), proceed with the suspension of the obligation of payment of instalments and interest, until 30/06/2020.
- The terms of the loan and/or credit facility agreements, other than the repayment terms thereof, as well as all relevant collateral agreements, continue to apply.
- The instalments and interests suspended are added to the balance of the amount owed under loan and/or credit facility and the corresponding terms of the loan and/or facility agreements are automatically extended to accommodate the above. However, the total of the loan instalments and interest, will not become immediately due, unless agreed otherwise between the Beneficiary and the financial institution.
- On expiry of the suspension period, repayment of loan instalments and interest resume and the repayment period is considered to be automatically extended for as long as required, until the final repayment of capital and interest, however such extension shall not by any means differentiate the instalment payments after 01/01/2021.
- During the suspension period, the borrower retains the ability, provided it has been communicated to the financial institution, to pay or voluntarily pay any amount(s) towards the repayment of its credit facilities which, if the Decree was not in place, would be payable under the terms of the existing credit facility agreement.
Relevant article as to the provisions of the first Decree has been published on our website at https://www.frangoslaw.com/news/news/covid-19-loan-instalments-and-interest-suspended/
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