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To The Point: Finance | Q2 2022 – Insolvency/Bankruptcy



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Editor’s Note

Togetherness, agility, stamina | CEE

The tragic situation in Ukraine has given us all pause to
appreciate that very little, if anything, can even begin to compare
to the tragedies unfolding so close to home. It has shown us that
each of us can help in some little way and that together we can
achieve more to help those in need. That there is a great deal to
be grateful for and that nothing can be taken for granted. I am
grateful for the solidarity shown and the amazing efforts put forth
by all our team members and clients. We will need to continue
working together, both to support those in need and to assist our
clients in the current, predominantly volatile, environment.

Q2 was a busy period for banking & finance throughout all
our offices in CEE, and it is also set to be a busy summer. No
doubt it will continue to be volatile, and we will likely have to
weather more stop & go situations, more distressing
circumstances. Energy and infrastructure/public law projects are
already centre-stage and this is not likely to change any time
soon. Consolidation work in the financial sector seems to be
ongoing. Debt restructurings are tangibly on the rise (in
particular on the back of the market conditions and the
Restructuring Directive, which is expected to be implemented in
most CEE jurisdictions this summer). In parallel, governments will
likely double down on consumer protection, on new support schemes
for households and essential businesses and, in some jurisdictions,
on new moratoria on bank loans. Take Romania for example: the end
of May saw the transposition of Directive No. 2019/2161 on consumer
protection, a new moratorium on credit repayments was introduced at
the end of June and Directive (EU) 2019/1023 on preventive
restructuring frameworks is expected to take effect in July, not to
mention all the energy-related initiatives.

We will continue to work together with our clients and friends
to help those in need and to assist our clients. We will also
continue to focus on both agility and long-term stamina. And I am
grateful that we can continue to do this and am optimistic about
the future.

Austria

  • EBA assesses role of environmental risks in prudential
    framework for banks and investment firms

    In May 2020, the European Banking Authority (EBA) published a
    Discussion Paper (DP) on the role of environmental risks in the
    prudential framework for credit institutions and investment firms.
    The EBA anticipates that environmental risks will trigger higher
    losses than they have in the past, and has therefore conducted an
    analysis as to whether the current Pillar 1 own funds requirements
    framework does actually capture these risks appropriately or
    whether capital requirements might be underestimated (and thus
    would need to be increased). The DP explores whether and how
    environmental risks could be better incorporated into the
    prudential framework, including in relation to all risk categories,
    such as credit, market and operational risks. The EBA also makes it
    clear that this DP investigates whether the risk profiles of
    exposures are appropriately reflected based on evidence and
    correlation, and explicitly emphasises that the DP is not currently
    intended to be used for policymaking (or political) purposes. The
    full DP can be downloaded
    here
    .


    Matthias Pressler

Hungary

  • EBA support to Hungarian green financing

    The European Investment Bank (EBA) will support Hungarian green
    financing by granting long-term forint-denominated loans, pursuant
    to the cooperation agreement entered into with the Hungarian
    National Bank (HNB) in May 2022. The cooperation aims to boost
    sustainable economic and social growth and to support post-pandemic
    recovery and climate action in Hungary. The HNB launched two
    programmes: the Green Home Programme and the Green Mortgage Bond
    Purchase Programme. The Green Home Programme facilitates the
    development of green homes and establishes a green home loan
    market. According to this programme, the HNB will reimburse
    Hungarian banks for the financing granted for the construction and
    purchase of green homes. The Green Mortgage Bond Purchase Programme
    is also intended to support the purchase of green-rated mortgage
    bonds and aims to promote green housing lending from this
    alternative market too.


    Gergely Szaloki

Poland

  • Marketplace

    In response to inflation and the rapid growth of reference rates
    in Poland, the Sejm (the lower house of the Polish Parliament)
    recently passed a bill introducing credit holidays, the expansion
    of the Borrowers Support Fund, the replacement of the WIBOR index
    and the extension of anti-inflationary shields. The process of
    choosing a replacement for WIBOR will be regulated by a separate
    bill. The following indicators are being discussed: WIRF (Warsaw
    Financial Market Index), WIRD (Warsaw Deposit Market Index) and WRR
    (Warsaw Repo Rate). It is worth mentioning that PLN borrowers who
    have taken out residential mortgage loans have started to question
    the methodology of determining the value of the WIBOR index by
    filing lawsuits. The effects of those challenges are to be closely
    monitored.


    Paula Weronika Kapica

Slovenia

  • SEE: Financial sector deal activity – summer
    break?

    Looking at the first two quarters of 2022, two key observations
    can be made with regard to financial sector expansion/M&A
    activity in SEE. On the one hand, consolidation activity in the
    banking sector has slowed somewhat (with the exception of the
    activity resulting from the resolution
    of Sberbank Europe
    ), with certain pending deals being put on
    hold and short-term plans for growth-driven acquisitions
    temporarily shelved by players otherwise in expansion mode. On the
    other hand, a similar “deceleration” can be observed in
    the expansion plans of players in the fintech area, where the
    “SEE market conquest” optimism observed in 2021 (both in
    terms of M&A and greenfield cross-border market entries) gave
    way to a more cautious and selective target (market) approach. At
    present, it is difficult to judge whether this is a broader sign of
    the upcoming summer break or simply a (temporary) slowdown
    resulting from the overall (consumer and institutional) uncertainty
    caused by the current global situation. In any event, we will be
    staying tuned throughout the summer!


    Vid Kobe

Bulgaria

  • Insolvency and pre-insolvency

    A government draft transposing the EU Restructuring Directive was
    published in May 2022. The “likelihood of insolvency”
    criterion under the current domestic framework has been amended and
    a restructuring application may be filed if, based on the
    maturities expected over the next 12 months (as opposed to the
    current six months), the debtor would be unable to make payments
    (as opposed to the current situation whereby certain payments are
    made). The current six-month threshold means that applications are
    submitted too late, as courts regularly find an actual insolvency
    as opposed to a “likelihood of insolvency”. Another
    novelty is the special insolvency priority for providers of new
    financing – an option under the Directive that the government
    adopted in the draft.


    Tsvetan Krumov

Austria

  • Will term-independent costs be reduced in the event of
    early loan repayment?

    With reference to the ECJ’s “Lexitor” ruling, the
    Austrian Supreme Court recently clarified that the Austrian
    legislator’s intention not to provide for the pro-rata
    repayment of term-independent costs in the event of early repayment
    of loans, outlined in para. 16 (1) of the Consumer Credit Act (old
    version; VKrG aF), would result from the clear wording of the
    national legal provision. The Supreme Court is therefore of the
    opinion that term-independent costs are not to be reduced in the
    event of early loan repayment according to para. 16 (1) of the
    Consumer Credit Act (old version). The legislator has, however,
    since amended para. 16 (1) of the Consumer Credit Act in line with
    EJC case law. It is ultimately still unclear which costs are
    actually covered by the right of reduction under current Austrian
    law.


    Bettina Kranawetter

EU

  • Direct lending

    Against the backdrop of an increasing demand for credit from
    alternative debt providers, on 25 November 2021, the European
    Commission proposed a harmonised set of rules for direct lenders,
    which should not be overlooked. The proposed amendments to the
    AIFMD include the introduction of harmonised rules on the risk and
    liquidity management of direct lenders and loan origination funds
    as well as additional transparency obligations. Most notably,
    however, the European Commission’s proposal foresees that
    AIFMs/AIFs should be permitted to lend on a cross-border basis
    throughout the EU. If enacted in the proposed manner, this will
    resolve any conflict with bank-lending monopoly rules that may
    otherwise exist in Member States.
    Martin Ebner

Romania

New moratorium

Government Emergency Ordinance No. 90/2022 entered into force on 29
June 2022. It stipulated that the payment of loan instalments
(principal, interest and fees) may be deferred at the request of
the borrower for one to nine months for loans taken out before 30
April 2022 (some conditions do apply). Revolving loans, including
credit cards, overdrafts and credit lines are excluded.


Matei Florea

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Insolvency/Bankruptcy/Re-structuring from European Union

Project Finance 2022

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The past year has once again been dominated by COVID-19 and the restrictive measures imposed by the federal and state governments to combat the pandemic.



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