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Serbia: Mandatory moratorium on repayment obligations to banks and lessors

19 March 2020 – In response to the COVID-19 pandemic and the state of emergency introduced in Serbia on 15 March 2020, the National Bank of Serbia (“NBS”) adopted on 17 March 2020 two decisions aimed at protecting Serbia’s financial system: the Decision on Temporary Measures for Protection of the Stability of the Financial System (“Decision on Temporary Measures for Protection”), which applies to banks; and the Decision on Temporary Measures for Leasing Providers with the Aim of Protection of the Stability of the Financial System (“Decision on Temporary Measures for Lessors”), which applies to lessors. The NBS has issued these decisions to address potential repayment difficulties that may be faced by borrowers/lessees. Both decisions entered into force on 18 March 2020 and contain, in general, the same obligations for both banks and lessors.

Under the aforementioned decisions, banks/lessors are obliged to offer borrowers/lessees (physical persons, entrepreneurs, farmers and companies) a moratorium on repayment obligations and must publish an offer to this effect on their website within three (3) days as of the date of entry into force of the decisions. The moratorium cannot be shorter than 90 days, and/or shorter than the duration of the state of emergency introduced in response to the COVID-19 pandemic.

For the duration of the state of emergency, banks/lessors are prohibited from charging default interest on any due and unpaid receivable and cannot initiate enforcement proceedings, mandatory collection proceedings and/or any other legal measures aimed at the collection of a receivable against a borrower/lessee.

The repayment moratorium is deemed to be accepted if the borrower/lessee does not refuse the offer published on the website of the bank/lessor within 10 days as of the date of publishing the offer. Upon expiration of this 10-day period, the moratorium automatically enters into force.

Based on the explanatory notes published by the NBS on 19 March (“Explanatory Notes”), the bank/lessor has the right to collect payments that become due until the date as of which the moratorium enters into force, unless the borrower/lessee has explicitly requested application of moratorium prior to such date but not earlier than the date on which the offer is published. Further, the Explanatory Notes provide that in case that the borrower/lessee continues to regularly pay its obligations, it does not prevent the borrower/lessee from application of moratorium at the later stage during the term of the state of emergency, i.e. such payment would not constitute a waiver of the right to moratorium.

Banks/lessors are obliged to regulate, pursuant to their internal acts, inter alia, the type of additional benefits that may be offered to borrowers/lessees; the manner of communication with borrowers/lessees; the monitoring system and system of reporting to the NBS in relation to these measures; and results of its application. Such internal acts should be submitted to the NBS by banks/lessors immediately following their adoption. In addition, banks/lessors are obliged to submit monthly reports to the NBS on the measures and activities implemented in line with the decisions. The report should include information about the total number of borrowers/lessees, the number of borrowers/lessees to whom benefits are offered, the number of borrowers/lessees that accept the offer, etc. Banks/lessors may not transfer the costs in relation to such actions to borrowers/lessees. Banks/lessors should harmonise their internal rules with the decisions within five (5) days as of the date of entry into force of the decisions.

The classification of the claims of banks subject to the moratorium are addressed separately in the Decision on Temporary Measures for Protection. Namely, the claims of banks towards borrowers that have received a repayment moratorium and which, at the moment of entry into force of the Decision on Temporary Measures for Protection were not in default for longer than 90 days, are not deemed restructured, nor as a problematic claim or problematic loan, and/or it will not be deemed that a default event has occurred.

Borrowers/lessees that do not actively refuse the offer of banks/lessors for the repayment moratorium will be able to pause the repayment of both the principal and contractual interest under the relevant agreements. Borrowers/lessees that opt not to repay their obligations to banks/lessors may not be sanctioned by charging default interest on the unpaid receivable or mandatory enforcement.

In general, based on the wording of the decisions, it is currently unclear whether the intention is that the moratorium can last less than 90 days in the event that the state of emergency will be rescinded within less than 90 days. This is because the decisions prescribe that banks/lessors are obliged to offer their clients a debt repayment moratorium for a period of 90 days and/or a period that is not less than the state of emergency. Ideally, this ambiguity will be clarified by the NBS in the near term.

We are following closely developments in Serbia relating to the COVID-19 pandemic and will keep you advised of any new regulations or decisions that may impact your business.

For further information please contact Branislav Marić, Partner, at

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, Partner, and Tijana Arsenijević, Senior Associate, at .