Spain orders banks to extend state-backed loan scheme for another 6 months

Spain ordered banks to comply with a six-month extension of a state-backed loan scheme to June next year, designed to help companies struggling with the impact of the coronavirus pandemic.

Economy minister Nadia Calvino told bank clients who have no overdue payments can request these loans. Banks should also provide these loans with longer maturities and grace periods if customers ask for them, the minister said.

“These measures are aimed at addressing potential solvency problems that may start arising and prevent viable companies from shutting down,” Calvino said.

Spain has already provided €108 billion in state-guaranteed loans to its companies, she said.

With nearly 1.5 million cases and 41,253 deaths from COVID-19, and an economy that relies heavily on tourism, Spain has been one of the countries in Europe hardest-hit by the pandemic.

The International Monetary Fund has said Spain is the euro zone country with the highest take-up of guaranteed loans.

At a regular weekly meeting, the cabinet also approved an extension until March of restrictions on forced bankruptcies of companies affected by the coronavirus pandemic to avoid the so-called cliff effect from the withdrawal of some support measures next year.

Guarantees on the state-backed credit lines, designed to help companies amid the pandemic-induced economic crisis, were extended to up to eight years from the originally planned five on most loans.

An extra year was added to the grace periods, which allow borrowers to delay payment without being charged late fees, being found in default or having their loans cancelled.

Companies had been given until December to apply for the state-guaranteed funding scheme of €140 billion. The grace period on a significant volume of loans ends in April, and many small businesses feared they would not have been able to cope with their payments that soon. 

Original Story: Reuters | Belén Carreño 
Photo: Caixa Bank website
Edition:Prime Yield