In March, banks granted professionals a 6-month deferral on loan repayments. Nearly 2 million companies took advantage of this, deferring repayment of 20 billion euros. In view of the large number of applications received, the scheme will be maintained until next January.
Italy, Europe's pioneer in granting moratoria on bank loans
On March 15, while France was preparing for the lockdown, Italian banks pledged to support businesses by deferring loan repayments for up to 6 months. This exceptional measure, which entailed no penalty for the professionals who availed themselves of it, made it possible to defer repayment of 20 billion euros.
In response to companies' fears, Italy has decided to extend the moratoria by decree until the end of January 2021. In France, neither Bercy nor the banking sector has taken a position on renewing this measure.
More than half of requests are from small and medium-sized businesses
The moratorium will be extended automatically, without the need for further bureaucratic procedures. To date, around 93% of applications have been accepted, half of which concern SMEs, 3% have been rejected and 4% are still under consideration.
As regards individual customers, 470,000 applications were accepted by the banks represented by ABI, for a total amount of 20 billion euros. It has to be said that containment has had a major impact on household consumption. For the country, Covid-19 represents an unprecedented shock, with GDP expected to fall by 8.3% in 2020. This could be followed by a " partial rebound " of 4.6% in 2021, according to the National Statistics Institute.
Weakened credit institutions
This extension of bank loan moratoria is not without consequences for banks already weakened by the crises of 2008 and 2012. The banking federation is particularly concerned about the tightening of European rules on the treatment of subprime loans, which will come into force on January 1, 2021. According to several industry specialists, the application of the ECB's new rules on impaired loans (loans at risk of never being repaid) in the post-Covid period would result in " an atomic bomb ". However, banks will still be able to request a public guarantee covering 33% of late payments or increased drawings on committed lines.
Italian banks are hoping to return to a form of normality as soon as possible, as these arrangements are very costly. For the Société Générale group, for example, deferrals granted over the past 6 months amounted to 1.8 billion euros. At Crédit Agricole, these represented 4.2 billion euros at the beginning of July. With the end of the exceptional regime, banks will be able to resume their commercial development.