Posted on Oct 31, 2020 at 3:41 p.m.Updated Oct 31, 2020 3:42 PM
By announcing an additional deferral of one year, until 2022, on repayments of loans guaranteed by the State (PGE), has Bruno Le Maire tried to force the hand of the authorities in charge of banking matters? ” We have obtained from the Banque de France that these requests for additional deferrals are not considered as a default. ”, Said Thursday the Minister of Finance. The supposedly independent central bank was unable to confirm this position on Friday.
The subject is anything but anecdotal for the 600,000 companies that have contracted an EMP, nearly 90% of which is TPE, for an amount of nearly 123 billion euros. For many of them, these emergency loans were first used to relieve their cash flow and protect themselves at low cost against a decline in activity: the first year, they only have to pay their bank a rate of ‘interest’ close to 0% »And the low price of the guarantee. But while the first repayments are expected at the end of March, the new confinement worries them.
Classification of loans in default
By announcing an additional period of one year, Bruno Le Maire wants to give them a new breath of fresh air. But to have free rein, the banks need the green light from the authorities. ” This is an absolutely crucial point because you know that when you request a new deferral in the repayment of your loan, you are classified in default on the files of the Banque de France, insisted the minister. We obtained (that this one) does not make any more this classification and thus does not stigmatize the companies which would benefit from this deferral. ”
His words put the institution in an embarrassment. All the more so since such a decision must theoretically be coordinated with the European Banking Authority (EBA), responsible for ensuring the harmonization of banking rules in the European Union. However, at the end of September, the latter put an end to the framework that defined the moratoriums on loan repayments, decided urgently in early April to deal with the economic consequences of the pandemic. The EBA must give a first assessment of their uses in November.
The brutality of the second wave of the pandemic, and the activism of France precipitates things, while creating some confusion. Because for regulators, the subject is sensitive. Giving a three or six month moratorium to ensure corporate liquidity is one thing. Repeating the exercise is another. Regulators fear that by putting problems under the hood, banks may later find themselves facing a mountain of non-performing loans, which they will no longer be able to cope with. ” It’s backing up to jump better “, Fears a source close to the case.
In the absence of a formal green light from the authorities, the banks are walking on eggshells and offering a case-by-case approach. ” The banking profession undertakes to offer in a personalized way the amortization methods that best correspond to the customer’s situation and his needs.“, Announced Thursday evening the French Banking Federation (FBF), while saying open”a new period of one yearWhere only the interest and the guarantee would be paid.
Impact on bank dividends
So far, European banks have taken advantage of exceptional measures taken by States, the EBA and the European Central Bank (ECB) to limit the impact of the crisis on their accounts. If they spent large provisions for credit losses in the second quarter, they had a much lighter hand than their American counterparts, raising questions from the authorities. Because the higher these losses, the more the institutions are likely to need capital.
But the banks are only waiting for one thing: to be able to pay dividends again to their shareholders and bonuses to their employees. The ECB, in charge of bank supervision, wants to wait for the new macroeconomic projections for the euro zone, which it will publish on December 10, to give the green light or not. According to our information, she is so far skeptical. From his point of view, the capital requirements communicated by the banks are either too optimistic or not sufficiently documented. The Banque de France, the EBA and the ECB declined to comment.