If a liability is postponed on a case-by-case basis, i.e. not in the context of a general payment moratorium, but interest is applied to the amounts postponed in line with the conditions originally agreed (“original effective interest rate”), this by itself will not imply that the obligor is to be considered defaulted.

This is because, firstly, such postponement serves to ensure that the liability stays within the advised limit, thus avoiding a “past due material credit obligation” within the meaning of Article 178(1)(b) of the CRR. Secondly, in the event of such postponement, the obligor’s financial obligation is not deemed to be diminished; this therefore does not constitute a “distressed restructuring” within the meaning of Article 178(3)(d) of the CRR. Even in the case of such a postponement an institution may consider it unlikely that the obligor will pay its credit obligations to the institution in full, implying that the obligor is to be considered defaulted.

Background: in accordance with the guidelines regarding the definition of default, which have already been implemented by some institutions and which the remaining institutions must implement by 31 December 2020, a financial obligation is not deemed to have been significantly diminished if the present value of the expected remaining payments, calculated using the customer’s original effective interest rate, falls by no more than 1%. (BaFin Circular 3/2019 (BA) in conjunction with EBA/GL/2016/17, margin no. 51). Given the lack of other criteria, BaFin will take this as a benchmark for estimating whether postponement results in a material loss in present value, regardless of the extent to which the guidelines have been implemented by the respective institutions.

The provision under Article 178 of the CRR also applies to the prudential backstop (Article 47a et seq. of the CRR) and to the NPL capital deduction. In other words, this falls under “living forbearance” and therefore not under the prudential backstop. The same applies to the ECB NPL calendar, which is applicable to significant institutions (SIs).

Otherwise, there is nothing in the MaRisk to oppose a general postponement of instalments in principle. In particular, the MaRisk does not specify the criteria and conditions under which postponement on a case-by-case basis for the benefit of the borrower or tenant would be allowed. This decision falls to the individual institutions and must be taken in line with their respective business policy within the scope of compliance with due diligence requirements customary in the industry. Naturally, the criteria used to determine what is considered customary in the industry are different in the event of such an unprecedented crisis. This will also be taken into consideration in subsequent inspections.