Covid-19 – Banking Initiatives

This note is part of a series that the lawyers of Reddy Charlton will issue on the major legal, personal and business issues that will confront us all during the Covid-19 crisis.

Since the government announced Covid-19 (Coronavirus) to be a global pandemic, we have started to witness many changes being implemented across many different sectors. As these times are indeed unprecedented, it has caused both the government and health officials to assess the best way in order to deal with this virus and how to flatten the curve of its effect.

Over the last two weeks we have seen many initiatives been proposed by Revenue, Enterprise Ireland and also the financial institutions. On Wednesday 18 March 2020 meetings occurred between the Minster for Finance and the five main banks in Ireland (AIB, Bank of Ireland, KBC, Permanent TSB and Ulster Bank as well as the Banking and Payments Federation Ireland (BPFI)) to determine the steps they would propose to take over the coming months.

In this article, Reddy Charlton aims to highlight the most important changes being implemented by the financial institutions and government officials in order to target the plight of both business and personal customers during this time.

What should business owners do if they need to access ‘emergency finance’?

• The Department of Business, Enterprise and Innovation have confirmed a range of assistive measures for businesses that may be affected by the current crisis.

• Credit Guarantee Scheme – These measures include the Credit Guarantee Scheme which will be available to SME’s subject to the relevant terms and conditions. In effect the government will provide a partial guarantee to banks against losses on qualifying loans. Businesses can avail of this Scheme to obtain loans to support changes they need to make to their business as a response to the Covid-19 pandemic. Key features of the scheme includes facilities of €10,000 – €1 million, terms extending to 7 years and term loans, demand loans and also performance bonds. The scheme is available from the participating lenders who are AIB, Bank of Ireland and Ulster Bank.

• Working Capital Scheme – THE SBCI have announced the introduction of the SBCI COVID19 Working Capital Scheme. Applicants who believe they are eligible for this scheme are advised to avail of the finance as soon as is reasonably possible in the context of their respective business requirements. It has been confirmed that borrowings under the scheme will range from €25,000 – €1.5 million and that no security will be required for loans up to €500,000.

• Microfinance Ireland business loans – Small businesses may also avail of the business loan being offered by Microfinance Ireland which is a government initiative to try and secure job creation in Ireland. To avail of this the business must have less than 10 full time employees and an annual turnover of up to €2 million. The business must also be in a position to show that 15% of its actual or projected turnover is negatively impacted by COVID-19.

• It is important for all customers who believe they will require emergency finance generally, to contact their banking relationship advisor to get more information on the application requirements and next steps involved. We advise that you do so as early as possible to avoid any delays with applications being processed.

What are the changes being implemented by the Banks?

• A mortgage payment break up to three months for business and personal customers affected by Covid-19, to be followed by ongoing reviews depending on how the situation evolves. This includes credit servicing firms and non-bank lenders who provide mortgages. Customers who wish to avail of this payment moratorium should contact their respective bank.
• The banks have agreed to ensure a simplified application process in place to make it as easy as possible for customers impacted by Covid-19 to receive the relevant support from their banks. THE BPFI confirmed it is working with all member banks to achieve this goal.
• The five main banks together with the Central Bank of Ireland are working together to ensure that any Covid-19 applications for payment breaks will not adversely impact the customer’s credit record.
• Court proceedings will be deferred for an initial period of three months.
• Any customer who is or believes they will face potential difficulties in making loan repayments during this time is advised to make contact with their bank as early as they can.

What are the changes being implemented by the Minister for Finance?

• The Minister for Finance has requested that the banking industry increase the limit on contactless payments to €50.
• There will also be a deferment on the collection of stamp duty on credit cards to July 2020. This is usually levied every year in April.

What are the measures proposed by the Central Bank?

• One of the key steps which the Central Bank has proposed to take involves allowing the banks to use a ‘capital buffer’ in order to protect the overall credit facility to individual customers and businesses.
• The buffer known as ‘The Counter Cyclical Capital Buffer’ (CCyB) will be reduced from 1% to 0% by 2 April 2020.
• As a further precautionary measure, the bank announced that it did not anticipate that it would increase the capital buffer contribution before the first three months of 2021 at the earliest.
• Furthermore, the Central Bank is currently working on numerous alternative measures which include the introduction of a €750 billion Pandemic Emergency Purchase Programme and the temporary capital and operational relief to banks across the Eurozone generally.
• The Governor of the Central Bank of Ireland, Gabriel Makhlouf made the following comments subsequent to the meeting held with the BPFI:

“Our role is to protect and maintain financial stability now and into the future. We are working constructively with all the sectors we regulate, recognising the challenges they face to maintain continuity of business and provision of services to customers. The resilience of banks has been built up over the last decade. We want to ensure they remain resilient through this challenging environment in order to safeguard the financial system in the public interest.”

How can we Reddy Charlton help?

During this Covid-19 crisis, Reddy Charlton Solicitors are eager to support, encourage and guide your business. If you have any queries or seek further information on the tax changes and implications or any other area of commercial law, please contact Niamh Gibney on ngibney@reddycharlton.ie