Coronavirus (COVID-19) related moratorium on corporate and retail loans in Slovakia

1. Description of the legislation

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

Yes.

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”)?

Act amending the Act No. 67/2020 Coll. on certain extraordinary measures in the area of finance in relation to the spread of dangerous contagious human disease COVID-19.

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

Debtor is a consumer:

  • If the creditor is a bank or branch of a foreign bank – postponement of repayments for a period specified in the request for postponement of repayment, limited to 9 months from the due date of the next outstanding repayment instalment. The debtor can request the postponement of instalments of the same loan only once during the pandemic period.
  • If the creditor performs activities based on a special consumer credit licence – postponement of repayments for a period specified in the request for postponement of repayment, limited to 3 months from the due date of the next outstanding repayment instalment. The debtor may re-apply for the postponement of instalments for another 3 months if the debtor notifies the creditor of this interest before the expiry of the original postponement period.

Debtor is a small employer or another entrepreneur – natural person:

  • If the creditor is a bank or branch of a foreign bank – postponement of repayments for a period specified in the request for postponement of repayment, limited to 9 months from the due date of the next outstanding repayment instalment. The debtor can request the postponement of instalments of the same loan only once during the pandemic period.
  • If the creditor is a person other than a bank or branch of a foreign bank – postponement of repayments for a period specified in the request for postponement of repayment, limited to 3 months from the due date of the next outstanding repayment instalment. The debtor may reapply for the postponement of instalments for another 3 months if the debtor notifies the creditor of this interest before the expiry of the original postponement period.

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

No.

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 moratorium is not mandatory. Each borrower may opt in if they want to be protected by the moratorium.

2. Parties and agreements affected by the Relevant Act

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

Yes, the moratorium is available to consumers as well as to small- and medium-sized entrepreneurs.

2.2 Who are the affected Lenders?

  • Bank or branch of foreign bank
  • Financial institution performing activities based on a special consumer credit permission
  • Another creditor who is a person other than a bank or a foreign bank branch

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

Consumer loans

In respect to consumer loans, the relevant Act refers only to banks or branches of foreign banks, eventually entities operating based on the special consumer credit permission, which would exclude foreign institutions active on a cross-border basis without establishing a branch from its application. However, as the Relevant Act does not provide provisions on international private law, international consumer protection rules could apply in respect to consumers. As a result, the Relevant Act could eventually apply if it were more favorable to consumers than chosen law.

Commercial loans

In respect to commercial loans, the relevant Act would apply even to a loan granted by a foreign entity if Slovak law is the governing law. If a loan was granted by a foreign entity and the governing law is a foreign law, the relevant Act will not applicable.

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)?

No, there is no cut-off date with respect to loan agreements. It applies also to loans defaulted prior to the COVID-19 situation. However, in such case the creditor may decline the request of borrower for postponement of instalments.

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

The moratorium applies to:

  • postponement of credit loan principal
  • postponement of principal and interest payments on the credit loan, and
  • maturity postponement of a credit loan payable in one single payment.

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

Yes. An exception is a home loan: postponement of repayments on a home loan does not affect the extension of the repayment term of this loan.

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?

Yes, but the creditor may decline the request of the borrower for postponement of instalments if the borrower is already in default.

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)?

Yes, the scope of the proposed act is only the postponement of the repayment instalments, it does not order waiver of right to enforce any other part of the loan agreements. Thus, lenders will be able to terminate the loan due to reasons previously agreed in the loan contract in regard to covenants specified in the original loan agreement.

Picture of Peter Simo
Peter Šimo
Of Counsel
Bratislava
Natália Jánošková
Associate
Bratislava
Zuzana Nikodemova
Zuzana Nikodemova
Senior Associate
Bratislava