The Government and the National Bank of the Republic of North Macedonia (“National Bank”) introduced several amendments dispersed through the existing regulatory framework in order to facilitate the country’s attempt to support the liquidity during the COVID-19 outbreak.
Most recently, the Government has instituted solutions affecting financing companies and finance leasing providers (“Financial Institutions”) as well as commercial banks and the way they are allowed to collect instalments in finance leasing and loans from financing companies.
Finance Companies and Finance Leasing Providers
Financial Institutions should adopt internal rulebooks for implementing the new governmental decrees under which:
- individuals will pay 30% or less of their monthly instalments and no fees, expenses, commissions and/or penalty interests between 1 April and 30 June 2020 for all agreements signed with Financial Institutions before 31 March 2020,
- the payment of the remaining 70% should also be postponed or proportionally included in due monthly instalments after 30 June 2010,
- deadline for payment of monthly instalments is extended for at least 90 days,
- between 1 April and 30 June 2020, terms of existing agreements can only be amended in favour of the clients,
- amended terms should be communicated either by publishing them on respective institution’s website or directly to each client.
Individuals are entitled to decline the amended terms within 10 days after they were informed of the offer, otherwise it would be considered that the agreement is amended. When it comes to legal entities, they can have the terms amended upon their request, if such request is filed until 30 June 2020. Legal entities are also required to explicitly accept a communicated offer within 10 days for it to be valid. Financial companies have 15 days to adapt their internet platforms in accordance with the adopted Decree.
Financial Institutions failing to act in accordance with these measures could face revocation of their license by the Ministry of Finance.
Additional measure that targets financial companies that offer credit agreements is reduction of the statutory interest rate. In addition, the creditors cannot charge expenses not included in the calculation of the annual percentage rate of charge (ARP) and which exceed 30% of the approved credit amount.
Most of the banks already offered amendments to arrangements with their clients and the rest of them are expected to do so in the coming days. However, almost every bank proposed those amendments for individuals only and left the option to agree on amended terms with legal entities on a case-by-case basis. Generally, the proposed offers by the banks include:
- Grace period from three to six months;
- Extension of the deadline for payment depending on the duration of the grace period;
- Calculation of interest during the grace period, but payment of the calculated amount in instalments after the grace period or as agreed with the client;
- No due amounts for used credit limit from a credit card within the period 1 April and 30 September 2020;
- Extension of the deadline for using the allowed overdraft on bank accounts until 30 September 2020.
The rules for communicating banks’ offers and their validity are the same as those for the Financial Institutions. If validly agreed and communicated, amendments also impact the accompanying instruments to the loan agreement, including the collaterals.
It is worth mentioning that the National Bank had previously introduced certain measures which lead to the mentioned activities by commercial banks, such as:
- increasing the default period for classifying a loan as nonperforming (NPL) from 90 to 150 days;
- allowing certain activities without classifying them as restructuring of credit exposure;
- allowing the banks to approve new credit exposures for closing an existing credit exposure, without previous restrictions.