The COVID-19 crisis—supervisory statement regarding the treatment of loans and reporting to the public

The Banking Supervision Department today sent banks and credit card  companies a draft statement regarding the implementation of existing requirements set in BSD's Reporting to the Public Directives, regarding the accounting treatment for banks' efforts to work with borrowers who temporarily encounter payment difficulties due to the COVID-19 crisis.

 The Banking Supervision Department encourage banks and credit card companies to act in a prudent and proactive manner to mitigate temporary adverse impacts on households and businesses which are affected by COVID-19, in line with the long term interest of the banks, their borrowers and the overall economy.

 In addition, the BSD provide guidance to properly implement existing Reporting to the Public Directives regarding troubled debt classification in the financial statements, and clarifies that short term loan modifications (for example, 6 months), such as payment deferrals, late fee waivers, or extensions of repayment terms, do not automatically result in a troubled debt restructuring classification of  loan modifications.

 The statement is similar to recently published guidance by agencies in the US and the world.

 In addition, the BSD clarifies that banks and credit card companies should include full disclosure in their quarterly public reports regarding all loans whose terms were modified as result of COVID-19 crisis.

 Supervisor of Banks Dr. Hedva Ber said, “The draft we issued today regarding the treatment for borrowers that encounter cash flow difficulties due to the crisis, but were in a good financial condition before it, will enable banks to continue to lend and assist borrowers at this time, in line with a long term view. The “oxygen” provided by banks to businesses and households at this time helps in reducing the crisis’s adverse economic effects on borrowers and on the overall economy.”​

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