Banks have managed to save the greatest impact of the mortgage moratorium for the coronavirus announced on Tuesday by the Government: they will not have to provision those loans as defaulters, contrary to what is established in the accounting regulations of the ECB. The Royal Decree includes a caveat to said rule so that part of these loans does not have to be recorded as a loss, although this requires reporting it to the Bank of Spain and raising it to public deed, which will make the procedure very cumbersome.
A huge concern in the sector regarding this measure was its impact on the income statement, since, if they had to qualify these mortgages as delinquent, the rule required them to provide huge provisions that they could carry away their already meager benefit. Above all, if the alarm state extends beyond the month that the Royal Decree announced yesterday by Pedro Sánchez. Provisioning involves 'putting in a drawer' a high percentage of the total loan (not just the deferred installment), an amount that is subtracted from the financial institution's earnings.
However, late Tuesday, the Government agreed to include a paragraph 2 in article 13 of the Royal Decree -to which ForexNews.online has had access- which allows to avoid this obligation.
"Once the moratorium has been granted, the creditor entity shall notify the Bank of Spain of its existence and duration for accounting and no imputation of the same in the computation of risk provisions", literally said section.
OBLIGATION TO RAISE THE MORATORIUM TO WRITING
Now, sources in the sector explain that, for this exemption to apply, the moratorium must "be forcibly raised to a public deed", which forces the cumbersome process of going to the notary … at a time when many notaries have closed temporarily due to the epidemic.
This drawback is one more in the long list of demands that the Government has imposed in order to access this moratorium, some really difficult to achieve with the confinement imposed by the state of alarm and that ForexNews.online explains today: registration certificate, simple note, property deed, family book, certificate of being unemployed, etc.
Banks are also crucial to another of the star measures announced by Sánchez: state guarantees for loans to self-employed workers and SMEs. However, this point is very little developed in the Decree, which does not specify the requirements or the procedure to request it, nor the percentage of the credit that the State guarantees through the ICO. Given that the guarantees amount to 100,000 million, and financing may be granted between 150,000 and 2,000,000, logic says that between 50% and 66% of the amount granted will be guaranteed, below the 80% established by the United Kingdom.