The moratoria granted to individuals and businesses by the banks at the heart of the Covid-19 crisis now cover a total of €871 billion in loans across Europe. The European Banking Authority (EBA) is urging caution.
Moratorium loans: an exceptional scheme widely used
Since mid-March, banks have been offering companies 6-month deferrals on loan repayments. The terms and conditions of these moratoria vary from country to country, but the objective remains the same: to enable borrowers, whether companies or households, to keep their heads above water by suspending and postponing their monthly repayments for a while.
In all, 16% of loans granted to European SMEs have benefited from this scheme, as have 13% of real estate loans and 7% of mortgages. 50% of these moratoria had already expired by September, and 85% by December.
Although the whole of Europe is affected by this phenomenon, France leads the way in terms of moratoria. As at June 30, the total volume of loans concerned in France stood at 255 billion euros, compared with 187 billion in Spain and 156 billion in Italy.
France, Spain and Italy have granted the largest volumes of loans, but others have a much higher proportion of loans under moratorium. In France, the proportion of loans subject to moratorium remains on average at 7%, while in Portugal, Cyprus and Hungary it reaches between 20 and 50%.
European Banking Authority urges banks to be cautious
The European Banking Authority believes that "loans under moratoria are likely to be associated with increased credit risk", and calls on banks to be vigilant. "Banks should remain vigilant and continuously assess the asset quality of these exposures," says the EBA.
According to the French Banking Authority, there is a risk of what it calls a "cliff effect": when these moratoria expire, they could cause "the rate of non-performing loans on banks' balance sheets to rise rapidly and significantly".
In Italy, in particular, the second wave of the epidemic and the associated restrictions led banks to grant new moratoria, prompting EBA to fear the emergence of a "culture of non-repayment". In France, on the other hand, banks did not offer new moratoria en masse, and only companies in the catering and tourism sectors were able to benefit from a 6-month deferral.