More stringent parameters from 1 January 2021 regarding default. Serious risks for businesses due to the reduction of the thresholds for being considered in default towards banks. Great concern especially in light of the current economic situation devastated by the COVID-19 pandemic.
The Delegated Regulation will come into force on January 1st (UE) n. 171/2018 of the European Commission of 19 October 2017 supplementary to the previous Regulation of 2013 which concerns the technical regulatory standards relating to the threshold of relevance of credit obligations in arrears for banks and other financial operators.
The document deals with the new European classification rules for the state of non-compliance of companies and natural persons, much more stringent than those adopted so far at national level, with the result that it will therefore become much easier to be classified as non-compliant customers by banks, or “bad payers”.
Please remember that this classification determines the reporting in the databases of the Risk Centers or SIC that the credit institutions consult forevaluate your creditworthiness when the customer submits a financing request.
Registration in these registers determines a greaterdifficulty in accessing credit.
According to the new rules, the bank is required to classify an exposure indefault when the individual or company has been in arrears for longer 90 days on a significant credit obligation. Therelevance of exposure is identified through two components: the amount of the arrears and the percentage of the arrears compared to the total exposures to the bank.
More precisely, for individuals and small and medium-sized businesses, which have an exposure to a banking group for an overall amount lower than 1 million euros, it will be enough to have a backlog from beyond 90 days whose amount is, at the same time:
- for individuals and small and medium-sized businesses, superior 100 euro and greater than 1% of the total exposures to the Bank;
- for businesses, superior to 500 euro and greater than 1% of the total exposures to the Bank.
With the entry into force of the new Regulation, the company will no longer be able to use margins still available on its credit lines to compensate for existing defaults and avoid classification as default.
The classification of the company in a state of default, even for just one of the existing loans, will result in all of its exposures to the bank being put into default, and it could also have repercussions on other companies connected to it and exposed to the same financial intermediary.
It will therefore be essential for businesses to punctually respect the payment deadlines set out in the financing contracts so as not to be in arrears in repaying their debts to banks, even for modest amounts., in order to prevent the bank from classifying the company as in default and to initiate actions to protect its credits.
