Law and regulation of Covid-19 loan moratoriums in Italy

1. Description of the legislation

1.1 Is there a moratorium on loans legislation implemented in your jurisdiction?


1.2 If no: Are there any ongoing discussions regarding a potential introduction of such measures?

Not applicable.

1.3 What is the name of the relevant legislation (the “Relevant Act”)?

The Relevant Act is considered Law-Decree 18 of 17 March 2020, together with consequent Ministerial decrees issued or to be issued.

Further legislation on the loans moratorium is to be found in the Addendum dated 6 March 2020 to an Agreement dated 2019 drafted by the ABI (association of Italian banks), even if that is compulsory only for adhering banks and was not specifically implemented to cope with the COVID-19 emergency.

Moreover, Law-Decree 23 of 8 April 2020 provides various additional measures such as national guarantee schemes for new loans to be granted to small and large enterprises.

1.4 What is the duration of the measures (period of moratorium)?

Loans and other credit facilities are suspended until 30 September 2020, namely: 

  • for credit facilities and loans granted against receivable advances existing at 29 February 2020 – amounts granted (either utilised or not) cannot be revoked until 30 September 2020
  • for loans with full repayment at expiration, which will be due before 30 September 2020 – contracts are automatically suspended until 30 September 2020 on the same conditions
  • for loans and other facilities to be reimbursed in instalments – payment of instalments or leasing rentals expiring before 30 September 2020 is suspended until 30 September 2020 and the reimbursement plan is deferred to ensure that no further charges apply to both parties. 

Suspension is granted on condition that it is requested by a SME, and that the relevant debt was not classified as a non-performing loan (“NPL”) or an unlikely to pay (“UTP”) loan at 17 March 2020.

1.5 Does the legislation provide for an extension of the period of moratorium?


A different extension may be sought through the Addendum by ABI, according to which the borrower may request suspension of payment of the principal amount for loans or postpone the expiry date of loans. However, the Addendum is applicable only for lenders that are party to the Agreement and cannot be combined with measures provided under the Relevant Act.

It is not clear at this point whether a company that resorts to the moratorium under the Relevant Act would be entitled at a later time to seek the extension provided by the mentioned Addendum by ABI.

1.6 Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?

The borrower can decide whether or not to apply for the suspension. The relevant request (which may also comprise interest that otherwise is due according to the original schedule, notwithstanding the deferral of the principal amount) must also include a self-declaration stating that the borrower: 

  • qualifies as a SME
  •  has suffered the consequence of COVID-19
  •  is aware of the criminal consequences of false declarations on the mentioned circumstances.

2. Parties and agreements affected by the Relevant Act

2.1 Is the moratorium available for both corporate and consumer loans?

The Relevant Act provides for suspension of loans of any kind including leasing, both for corporations and consumers.

Corporations must qualify as SMEs.

A law provision allowing consumers to ask for a suspension of the loan granted for the purchase of a first-domicile house in case of certain events such as loss of job was already in force before COVID-19. Such suspension right has been extended by the Relevant Act to self-employed professionals that provide a self-declaration on their reduction of income following the COVID-19 epidemic.

In addition, SMEs are entitled to recourse to a Central SME Guarantee Fund, to get a free-of-charge, partial insurance to credits granted by credit institutions. The coverage percentage is equal to 80% for direct guarantee interventions and 90% for reinsurance intervention (which, until 31 December 2020 has been extended up to 90% and 100% at certain conditions), for a maximum guaranteed amount of EUR 5 million for each company. Law-Decree 23 of 8 April 2020 extended the recourse to the Central Guarantee Fund also to midcap companies up to 499 employees.

2.2 Who are the affected Lenders?

The Relevant Act is addressed to banks, financial intermediaries and other entities authorised to grant credit facilities in Italy including foreign lenders.

2.3 Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?

The rules of the Relevant Act can be considered mandatory rules and therefore it will make no difference whether loans are granted by foreign entities and governed by foreign law.

3. Impact on the loan agreements

3.1 Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?

The relevant cut-off date is that of Law-Decree 18, namely 17 March 2020. New loans are regulated by Law-Decree 23 of 8 April 2020.

3.2 Does the moratorium apply to principal only, or also to interest and/or fees?

Under the Relevant Act, moratorium may apply to principal or to principal and interest, depending on the request by the borrower.

Under the Addendum by ABI, moratorium relates only to principal amount.

3.3 Will the maturity of the loan automatically be extended by the moratorium period?

Yes, if an SME applies for a moratorium, the maturity is automatically extended for a period equal to the suspension period.

3.4 Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?

The Italian Ministry of Finance clarified that all instalments accrued following entry into force of the Relevant Act can be considered for moratorium, even if communication of suspension is served following expiration of the relevant instalment. Instalments expired and unpaid before entry into force of the Relevant Act cannot be considered eligible for moratorium. 

3.5 Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

In this regards the legislation on COVID-19 states the general principle that the lack of fulfilment of certain obligations is justified by a force majeure, so a termination or acceleration of a loan due to defaults which may fall within a definition of force majeure is highly unlikely.

At the same time, termination may be foreseen in case of breach of obligations such as information duties which appear to be easily fulfilled even during the epidemic, but this cannot lead to acceleration of the loan during the suspension period.

Portrait of Paolo Bonolis
Paolo Bonolis
Portrait of Gianfabio Florio
Gianfabio Florio
Senior Associate