Law and regulation of Covid-19 loan moratoriums in Romania

Yes.

Not applicable.

The Romanian Government issued Emergency Ordinance No. 37/2020 introducing deferral of loan payments. The Relevant Act came into force on 30 March 2020 and was slightly amended on 14 May 2020.  The implementation rules have been approved by the Government and were published on 7 April 2020.

We note that, under the customary legal process in Romania, the Relevant Act must be approved by Parliament, and therefore its provisions may be amended by a subsequent approval law. 

Such approval law was passed through Parliament in May, however its provisions were challenged in the Romanian Constitutional Court and, pending resolution of such challenge, the law has not yet been enacted.

Borrowers are entitled until 15 June 2020 to submit to their lenders a request for a deferral of payments for a period ranging between 1 and 9 months, but ending no later than 31 December 2020.

The Ministry of Economy’s website where applications for Emergency State Certificates are made is operational (for the purposes of loan payments deferrals) from 6 April 2020, and applications for obtaining such certificates may be made until 15 June 2020.

No, the time limit is 31 December 2020.

The moratorium is triggered by the opt in of eligible borrowers (but is mandatory for the relevant lenders once the borrower has submitted a deferral request and if it meets the eligibility criteria required by law).  

Is the moratorium available for both corporate and consumer loans?    Both individuals and legal entities can benefit from the deferral rights introduced by the Relevant Act and this applies to both loan agreements and financial leasing agreements.

The Relevant Act applies to credit institutions and non-bank financial institutions, as well as branches of foreign credit institutions and non-bank financial institutions, which carry out activities on Romanian territory. 

It seems that the Relevant Act is not intended to apply to loans granted by foreign lenders which lend directly (rather than through an establishment) to Romanian borrowers.  

Furthermore, it does not apply to loans granted by international financial institutions.

As above in relation to foreign lenders.  

The Relevant Act shouldn’t in principle apply to (or be able to override) foreign law-governed agreements. 

Yes, the Relevant Act applies only with respect to loan agreements which were concluded before 30 March 2020. 

The Relevant Act applies to the payment of principal, interest and fees.

Yes, subject to the borrower being eligible and submitting a deferral request. The maturity of the loan would extend automatically in line with the borrower’s request.

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?    No, they are not. In fact, a borrower’s entitlement to request a payment deferral is conditional upon that borrower not being in default with any such payments falling due before the declaration of the state of emergency (i.e. 16 March 2020) or such overdue amounts having been fully repaid before submission of the payment deferral request.

The Relevant Act does not prohibit lenders from taking action in relation to any event of default other than non-payment.  Nevertheless, we would advise lenders to take legal advice and consider the merits of each event of default carefully (particularly when such events might be linked to the knock-on effects of the state of emergency or the COVID-19 pandemic in general) before proceeding with a termination/acceleration of their loans or taking any enforcement actions.