European banks offer relief to mortgage holders as coronavirus quarantines wallop incomes

Banks in Italy and the United Kingdom are offering a degree of leniency to borrowers struggling to make their mortgage payments, after mandatory quarantines have drastically reduced their ability to pay them.

Lenders being more lenient with customers unable to pay back loans as planned

Northern Irish bank Ulster Bank is one of many European lenders working with customers to be a little more lenient on loan repayment terms right now. (Hollie Adams/Bloomberg)

Banks in Italy, France and the United Kingdom are offering a degree of leniency to borrowers struggling to make their mortgage payments, after mandatory quarantines have drastically reduced their ability to pay them.

Laura Castelli, Italy's deputy economy minister, told Radio Anch'io on Monday that the government is working with banks to make sure households and small businesses are given some sort temporary payment relief while the northern part of the country is effectively on lockdown in an attempt to curb the spread of the virus.

"Yes, that will be the case, for individuals and households," she told the radio station.

Italy's banking lobby group, IBA, says its members are willing to do whatever they can to prevent companies and individuals from going bust while incomes are tight, including suspending interest payments, not listing them as in default for up to one year and extending payment periods. 

Italian banks implemented similar policies to consumers during the financial crisis. Italy has become the epicentre of the virus in Europe, with more than 9,000 confirmed cases and 463 deaths as of Monday.

Italian businesses have been hit hard by the coronavirus as consumers close their wallets and stay home. (Camilla Cerea/Bloomberg)

In Britain, the Royal Bank of Scotland has implemented similar policies that will give some borrowers relief from having to pay back debts. 

"We are monitoring the potential impact of coronavirus across all our customers to ensure we can support them appropriately through any period of disruption," a spokesperson for the bank told reporters.

British banking lobby group UK Finance says many of its members are willing to do something similar. "[Banks] are ready and able to offer support to their customers who are impacted directly or indirectly by COVID-19, which could include offering or increasing an overdraft or allowing repayment relief for loan or mortgage repayments: asking for help early is key," chief executive officer Stephen Jones said.

Britain has so far reported three deaths and 278 cases of the coronavirus.

RBS has been majority controlled by British taxpayers since it was bailed out in 2008 during the financial crisis, but is part of a banking conglomerate that also includes NatWest and Belfast-based Ulster Bank.

On Monday NatWest announced a new program that will make up to 5 billion pounds (almost $9 billion Cdn) available for small businesses that need help getting through the impact of the coronavirus, including Loan repayment holidays and temporary emergency loans with no fees.

"While many of our customers are yet to feel the direct impacts of Coronavirus, I want NatWest to have the right support in place, so we are there to help our … customers when they need us most," NatWest chief executive officer Alison Rose said in a release.

Rival British bank Lloyds says it has cut fees and offered payment holidays to some of its customers impacted by the coronavirus.

"As our customers face into such uncertainty, we want to provide reassurance to them that, if needed, we are here to help with additional working capital to get them through temporary interruptions to their business and to their cash flow," Lloyds commercial banking group director David Oldfield said.

An unnamed official at the french finance ministry told Reuters on Tuesday that France is pushing European bank supervisors to give firms struggling to meet debt payments more time before their loans are classified as non-performing.

French Finance Minister Bruno Le Maire told journalists at a news conference that all banking authorities, including those at the European level, had to show flexibility in the face of the outbreak.

"If we want banks to step up and give firms having cashflow problems more time, then at the European level we can't make them book certain things that could make market conditions even worse," Le Maire said.


With files from Reuters