English

New moratorium won’t solve problems, restructuring loans recommended

Ilustracija

It wouldn’t be real to expect Central bank to propose another automatic moratorium on the repayment of loans for citizens and economy. Instead of the third moratorium clients should focus on restructuring their loans, said representatives of the Central Bank.

“Decision on Temporary Measures for Mitigation of Coronavirus Consequences envisages that a bank can approve one or more of the following conveniences: extend period of repayment for the principal or interest, reduce interest rate, take over claims against third party, reduce the amount of debt, principal or interest, capitalize interest, replace the existing loan or loans with a new one or provide other similar conveniences”, CB explained.

With the aim of creating additional impulse for restructuring loans, Central Bank has enabled banks to treat the restructured loan as new loan in the procedure of the classification of assets and issuing reservations for potential loan losses.

Central Bank representatives remind that Montenegro is one of 12 world states that have implemented automatic moratorium and the only country in the region that has extended the automatic moratorium with a flexible moratorium.

Spillover of the crisis from the real to financial sector is already visible in the balances of banks in MNE.

Automatic moratorium has significantly improved liquidity of private sector, aggregate consumption and tax collection.

Secretary General of the Association of Banks of MNE, Mr Bratislav Pejaković, said to Pobjeda that it “is really hard to say if it’s real to expect the third moratorium in the existing conditions”.

“Right now, it’s hard to say what is real and what isn’t. Moratorium itself is useful for a specific period of overcoming crisis but for an extended period of time it can be counterproductive. As a banker, I am always for the option of paying interest in moratorium. So far, response of the Government and banks has been optimal,” Mr Pejaković says.

Economic analyst and professor at the Faculty of Management, Mr Vasilije Kostić, said that “it would be real to expect banks to enable moratorium again, if that’s necessary”.

If we analyzed the nature of moratorium, we will see, professor says, that it was a very rational business response to the new situation.

“The interest calculated during the moratorium proves that this was business action of banks, not sacrifice”, the analyst explains.

Mr Kostić points out that not every period is favorable for generating profit.

“Maintaining market position of market share is more important that generating short-term profit”, professor explains.

Asked if he believes the new moratorium would be endorsed by WB and IMF, Mr Kostić says they wouldn’t mind provided that solutions are not destabilizing for the banking system.

Member of the Special club and former president of the Committee on Economy, Mr Aleksandar Damjanović, said that banks should support clients more strongly.

“While we are still waiting for the third package of measures which was supposed to be adopted two months ago, it will be very interesting to see to what extent the banking sector will be engaged. General moratorium and then the selective moratorium certainly were favorable measures, but they were not sufficient”, Mr Damjanović says.

Mr Damjanović believes that WB and IMF wouldn’t mind the moratorium.

“On the contrary, another moratorium is in their interest. The country would be able to reduce additional borrowing at least to some extent, which would contribute to the improvement of public finances and that definitely interests WB and IMF”, Mr Damjanović says.

President of the Committee on Economy, Mr Predrag Sekulić, says that moratorium has been confirmed as efficient tool but adds that every client should be observed separately.

“We must be aware that every moratorium has an impact on the liquidity of banking sector and can be disastrous for commercial banks. Banka re aware that if the debtor is not able to repay the loan, everybody loses”, Mr Sekulić says.

He warns that no one should forget that this is a contractual relationship between the client and the bank.

Asked if the WB and IMF would agree with another unconditional moratorium, Mr Sekulić says that the scale of the economic crisis around the world is much bigger than projections.

“Therefore, I think WB and IMF and other international institutions and global creditors will be required to act together to prevent complete collapse of the world economy”, Mr Sekulić said to Pobjeda.

 

Send this to a friend