COVID19: Surge in requests for bank loan repayment freeze

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Loan repayment suspension applications have surpassed 23,000 at Cyprus’ two largest banks, as retail borrowers and companies try to preserve disposable income amid the economic shutdown during the coronavirus pandemic.

The Ministry of Finance issued a decree allowing eligible borrowers, those who in end-February 2020 had no arrears exceeding 30 days to request a loan repayment freeze.

According to information gathered by CNA, Bank of Cyprus, the island’s largest lender, applications have exceeded 11,000 with the bank approving the overwhelming majority.

Sources from Hellenic Bank, the second-largest lender with a predominantly retail loan book, applications exceeded 12,000.

95% of applications come from eligible borrowers, with 80% of applications coming from retail borrowers and 20% by corporate.

As part as retail borrowers are concerned, around half of the applications are associated with housing loans, consumer credit and credit card limits.

Both banks have clarified that loan suspension begins at end of March, following the approval of the law, irrespective of the date of the application’s submission, while the banks intend to return money in case of instalments paid before an application is submitted.

The European Banking Authority (EBA) and the Single Supervisory Mechanism as well as the local regulator, the Central Bank of Cyprus (CBC), have clarified that loans which will freeze under the legislated and general loan repayment moratoria will not be considered as non-performing.

Banks have announced they will not compound interest over the nine-month suspension period.