Payment standstill introduced by the National Bank of Serbia during the coronavirus state of emergency - what we know so far?

The National Bank of Serbia (NBS) has introduced a payment standstill for various categories of debtors and lessees which includes, among other: freezing payments on all payments becoming due during payment standstill (loans, credit cards, overdraft, etc), freezing enforcement and initiation of enforcement, no default interest calculation, grace period prolongation (if applicable) and other measures aimed at easing the position of the debtor.

Scope of payment standstill

Banks and leasing companies were obliged to publish on their websites at the latest on 21 March (i.e. within three days as of the day the decisions entered into force which was on 18 March) the 90-day (or longer, but for as long as the coronavirus state of emergency is in place) payment standstill offer to the debtors. The payment standstill is offered to natural persons, entrepreneurs, agriculture producers, commercial entities and all lessees irrespective of their legal status.

• The standstill captures all payments of one debtor - the bank was obliged to offer a payment standstill to a debtor on all loans, credit cards and similar exposures irrespective of their number. The payment standstill enters into force on expiry of the 10th day (the offer is considered accepted on this 10th day, if not rejected) of the day of the offer being published on bank's website (at the latest on 31 March 2020) and will be applied for the next 90 days (expiring on 28 or 29 June 2020) after entering into force or longer, as the case may be, unless the debtor explicitly rejects the payment standstill offer.
• The debtor is not automatically entitled to a payment standstill on its obligations, which becomes due between the payment standstill offer published on the bank's website and its entering into force upon expiry of the 10th day (i.e. at the latest between 21 and 31 March 2020), but it could inform the bank explicitly that it will use the payment standstill even for payments becoming due in this 10-day interim period and the bank will have to approve this request. It is unclear whether such a deferred payment of instalments becoming due before 31 March 2020 will be repaid pro rata as the payments deferred due to payment standstill and in that manner the repayment period would be effectively prolonged for four months or the repayment of this instalment would become due together with the first monthly instalment after the payment standstill (i.e. after June 28 or 29 2020 unless the payment standstill is prolonged).
• The debtor is not prevented from using the payment standstill on later payments even if it initially rejected the offer and may require additional relief measures from the bank. The bank will have to take this request into consideration.
• Payments which become due during the payment standstill will not be considered restructuring or non-performing loans under the NBS regulations provided the debtors entitled to the payment standstill are not in payment arrears longer than 90 days on 18 March 2020 and it is applicable only to exposures existing on 18 March 2020, although the NBS suggests that banks offer to the prospective debtors facilitation in respect to approval of new exposures such as a three-six month grace period, and something similar.
• The bank will not calculate default interest during the coronavirus state of emergency and will not initiate or continue any foreclosure actions against the debtors, including any actions under the bills of exchange or promissory notes.
• The contractual interest will be calculated and distributed pro rata on all payments until the final repayment date. The final repayment date effectively will be prolonged for all debtors using the payment standstill for an additional 90 days or as long as the coronavirus state of emergency is in place (unless the debtor requires the settlement of all suspended payments as a bullet payment after the standstill).
• If the loan envisages a grace period and the first repayment date is within the payment standstill period, the bank will prolong the latter for as long as the payment standstill is in place and first repayment will become due only after the expiry of payment standstill/state of emergency due to coronavirus.
• Banks and leasing companies will not impose any additional charges on debtors for implementation of the payment standstill (presumably bank charges and fees as the wording is unclear) and will enact internal procedures for implementation of the payment standstill governing implementation tracking, responsibilities, communication with clients or debtors and any other additional relief measures, which the banks are entitled to introduce in addition to the payment standstill and will submit these internal acts to the NBS after their enactment.
• When it comes to the calculation of regular bank fees such as payment transaction fees, bank charges, account maintenance fees and similar fees, banks will be entitled to collect these fees even during the payment standstill. However, if a debtor does not have sufficient funds on the account, the bank will be able to collect these fees pro rata after the payment standstill once there are sufficient funds on the accounts. The bank will not calculate default interest on these due payments.
• The payment standstill is applied on factoring transactions where the bank appears as factor.
• The payment standstill is not applied on other obligations of the borrower under the loan agreement which are not payment obligations.
• The payment standstill is not applied on state-owned companies, municipalities and other categories of public entities when they appear as debtors.

Cross-border financings

The NBS decisions are silent in respect to cross-border arrangements. Given the nature of the payment standstill and the wording of the decisions, it can be assumed that it is only addressed to Serbian licensed banks/leasing companies extending loans/leasing arrangements to Serbian residents.

When it comes to syndicated loans in which the local banks provide loans to residents in foreign currency with the group of foreign lenders and arrangements in which the local banks provide RSD loans to the debtor (local lending line) along with the foreign lenders, which provide the loan in foreign currency in the same loan agreement (cross-border lending line), it may be assumed that these are also subject to the application of the payment standstill, but obviously only for the portion of the loan extended by the local banks to the debtor.

When it comes to implementation of the payment standstill in club deals, due to fact that in such deals the lenders are treated equally and that the payment default toward one lender accelerates the cross-default toward all other lenders, it is advisable that the lenders in these deals overcome this issue by signing an annex to the facility by which the payment standstill towards local lenders will not trigger an acceleration of the loan and will represent an event of default across all lending lines in one facility.


For more information on this eAlert, contact your regular CMS advisor or local CMS experts: Milica Popović and Ksenija Boreta.