Through Legal Notice 142, entitled Moratorium on Credit Facilities in Exceptional Circumstances Regulations, 2020, credit and financial institutions licensed by the Malta Financial Services Authority have been directed to offer a six-month moratorium on repayment of capital and interest ‘to support economically vulnerable persons who have been materially affected by the COVID-19 outbreak’.

Pursuant to the Regulations, the Central Bank of Malta (CBM) has been given powers to issue directives in relation to such moratorium. Indeed, the CBM issued Directive 18 to define the eligibility for the moratorium and other conditions related to the implementation of the provisions of the Regulations. Hereunder are the details issued by the CBM.

The moratorium applies to credit facilities sanctioned prior to 1 March 2020 - whether to individuals, households or businesses - and who can show that they have been negatively affected by the pandemic. Applications by borrowers are to be made with their respective credit or financial institution until 30 June 2020. The Minister for Health, in consultation with the Minister for Finance and Financial Services, may decide to extend the duration of the moratorium and the duration of the application period. The six-month moratoria period will start with effect from the date of approval of the application.

These are some of the key points in the Directive:

• The moratorium is not granted automatically, and the borrower will need to apply to the respective credit or financial institution. The moratorium comes into effect once the application has been approved. Borrowers have until 30 June 2020 to apply. If you have already taken up a moratorium offered by your lender, but feel that the terms under the Directive are more advantageous, you can renegotiate the terms subject to agreement with the credit or financial institution.
• Credit and financial institutions have the right to refuse the application as long as this is done within the terms of the Directive. However, please note that borrowers who have been in arrears prior to 1 March 2020 are not eligible for the moratorium.
• Borrowers can apply to forego payments of both capital and interest completely for six months, and can also opt to continue to pay the interest but not the capital.
• The payments missed during the moratorium will be paid during a six-month extension to the term of the credit facility. If the credit facility was due to mature at retirement age, the missed payments would be spread evenly throughout the remaining term of the credit facility after the end of the moratorium period.

Directive 18 was issued following consultations with the Malta Financial Services Authority and the Malta Bankers' Association.

The Bank has prepared a guide to explain the terms and conditions.

Read the full Directive.

Read the Legal Notice.

Should you have any queries or wish to discuss further, please send an email to covid@kpmg.com.mt.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.