On 22 March, the National Bank of Belgium (NBB) announced a guarantee scheme that should help individuals and companies facing financial difficulties because of the impact of COVID-19.
The scheme consists of two pillars. First of all, the financial sector commits to providing viable non-financial companies with payment problems due to COVID-19 with a grace period until 30 September 2020, without additional costs or charges. Secondly, the government will activate a EUR50 billion guarantee scheme for all new loans and credit facilities with a maximum duration of 12 months provided by banks to viable non-financial companies. The guarantee scheme will not apply to refinancing facilities and will only apply to loans and credit facilities granted until 30 September 2020.
The Belgian government and the NBB expect that this guarantee scheme will soften the financial impact of COVID-19 and that it will safeguard future financing to companies and individuals. Belgian Minister of Finance Alexander De Croo announced that the guarantee scheme will be implemented by royal decree after the government has received special powers from parliament. An update will be posted as soon as the guarantee scheme has officially been implemented. In the meantime, the following summary of measures is already available:
Deferral of payment
Non-financial businesses, small and medium-sized enterprises (SMEs) and the self-employed are allowed to defer payments until 30 September 2020 free of costs if they were not late on payment obligations on 1 February or if they had outstanding unpaid payment obligations equivalent to less than 30 days on 29 February.
Individuals with a mortgage loan also receive a no-cost deferral of payment until 30 September 2020. This postponement applies to both principal repayments and interest payments. The payment deferral for companies and individuals is not granted automatically. Borrowers have to prove that they are in distress because of COVID-19 and ask their bank for postponement of payment.
There will also be a guarantee scheme for new loans. The guarantee scheme applies to new loans granted by the banks to viable non-financial companies, SMEs and the self-employed. Only borrowers that were not in payment default on 1 February or had less than 30 days outstanding unpaid payment obligations on 29 February are eligible. The guarantee applies to new loans granted by the banks between now and 30 September 2020. The maximum duration of the new facilities is less than 12 months.
The federal government is allocating a budget of 50 billion euros to guarantee the banks’ losses on these new loans.
Maximum interest rate
Banks have to bear credit losses of up to 3 percent themselves. The losses between 3 and 5 percent are borne for one half by the banks and for the other half by the government. The losses above 5 percent are borne 80 percent by the government. The maximum interest rate for the new loans is 1.25% (excluding the ‘fee’). That ‘fee’ (extra costs) may amount to 25 basis points for loans to SMEs and 50 basis points for large companies. Loans are guaranteed up to a maximum amount of EUR50 million per company. Higher amounts require government approval.