Banks are lending to firms to address the Covid-19 crisis; first loans under the guarantee scheme

The outbreak of the virus and the containment measures brought a sharp economic downturn in March, which reached its bottom in April. More encouraging signs began to appear at the end of the second quarter, and the outlook remains more favourable. As might be expected, these circumstances have been reflected in bank activities. March saw the entry into force of a law allowing a moratorium on borrowers’ loan repayments. The banks have received 23,100 applications from borrowers to date. Some three-quarters of the applications were submitted in the first month that the new law was in force, after which the number slowly stabilised in line with the situation.

A law facilitating corporate lending backed by government guarantee was adopted in April. Banka Slovenije can reveal that the first loans backed by government guarantee have now been entered into by banks (three transactions in the total amount of EUR 16.5 million have been reported). It should also be reiterated that the banks have received 1,200 applications from firms for new liquidity loans in connection with coronavirus during this period, half of which have already been approved. Banka Slovenije’s assessment is that some of these loans will later be converted into loans backed by government guarantee.  

The economic situation took a sharp downturn at the end of the first quarter amid the imposition of containment measures, and reached its low in April. Even while restrictions were lifted and anti-crisis measures were introduced, the situation remained bad over the remainder of the second quarter. Slightly more encouraging signs began to appear in June: there was less pessimism among firms and consumers, and certain indicators began to improve (electricity consumption, freight tonnage on motorways). The outlook for the third quarter is more favourable for now: firms are expecting a significant increase in demand, while household consumption is expected to be less constrained.

Amid the economic downturn, late March saw the entry into force of the Emergency Deferral of Borrowers’ Liabilities Act, which provides for a moratorium on credit liabilities for firms, sole traders, cooperatives, farmers, and other individuals.

According to the latest figures, banks and savings banks have received a total of 23,100 applications for a moratorium from firms and individuals, covering loans in the total amount of EUR 2.5 billion. The deferred payments under the approved applications amount to EUR 333 million. The vast majority of applications, fully three-quarters, were received by banks during the law’s first month in force. The banks have already approved the majority of the applications.

During this period the banks were also lending to firms that needed liquidity loans in connection with Covid-19. They received 1,200 applications for new liquidity loans in the total amount of EUR 668 million. Approximately half of them have already been approved.

The Act on Additional Liquidity to the Economy to Mitigate the Effects of the Covid-19 Epidemic was adopted to this end at the end of April. Banka Slovenije can reveal that so far banks have approved three loans covered by this law in the total amount of EUR 16.5 million. Banka Slovenije’s assessment is that some of the liquidity loans in connection with Covid-19 will also be converted subsequently into loans backed by government guarantee.