March 9, 2020 / 2:38 PM / a month ago

France latest country to push for debt flexibility for coronavirus-hit firms

PARIS/LONDON (Reuters) - Banking regulators and policymakers globally are softening lending rules or calling for greater flexibility to prevent coronavirus damage from pushing under a swathe of viable businesses.

The rapid spread of the virus - which has led to more than 105,000 confirmed cases and more than 3,500 deaths worldwide - has also caused chaos for markets and businesses as factories close, workers are sent home and whole regions are locked down.

France wants European banking regulators to show flexibility towards firms falling behind on debt payments, two French finance ministry officials told Reuters on Monday.

A third finance ministry official said the ministry wants upcoming European bank stress tests to be postponed in response to the outbreak.

The European Banking Authority was not immediately available to comment and the European Central Bank declined to comment.

Bahrain’s central bank last week urged banks and financing companies to consider re-scheduling or granting deferrals on credit instalments, while the United Arab Emirates advised banks to take mitigating actions.

Other countries are expected to take similar actions, including Britain, where the incoming chief of the Bank of England has suggested a supply chain finance scheme could be launched in conjunction with the government.

Prime Minister Boris Johnson’s new government will present its first budget in parliament on Wednesday.

One of Britain’s biggest banks RBS (RBS.L) announced action of its own on Monday, saying it had begun offering payment holidays and temporary emergency loans to firms hit by the outbreak.

In France, one of the two finance ministry officials said some euro zone finance ministers were pushing European bank supervisors to give firms struggling to meet debt payments more time before their loans are classified as non-performing.

Banks are currently required to hold more capital against loans of firms that are in arrears for more than 90 days and are thus more reluctant to lend to such firms.

Extending the limit beyond that would take pressure off banks and allow them to keep lending to firms in need of credit, the official said.

The second of the two officials said there was strong demand from companies for a longer period before being qualified as non-performing.

On the stress tests, the third official said the macroeconomic scenario that European bank supervisors were going to use for the tests no longer reflected economic reality since the outbreak.

“It doesn’t seem appropriate today to go ahead with stress tests,” the official said.

French Finance Minister Bruno Le Maire told journalists at a news conference that all banking authorities, including those at the European level, had to show flexibility in the face of the outbreak.

“If we want banks to step up and give firms having cashflow problems more time, then at the European level we can’t make them book certain things that could make market conditions even worse,” Le Maire said.

Reporting by Gwenaelle Barzic and Leigh Thomas in Paris; Additional reporting by Huw Jones and Iain Withers in London and Balazs Koranyi in Frankfurt; Editing by Christian Lowe and Toby Chopra

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