Statement on Extension of Payment Breaks

The Central Bank has been engaging closely with the industry to ensure financial services providers are treating affected customers fairly and appropriately, as part of its extensive response to the COVID-19 pandemic.

The Central Bank of Ireland notes that the Banking and Payments Federation (BPFI) has announced that its members are to extend available payment breaks from three to six months for affected borrowers. The Central Bank is working with lenders to ensure that extensions to COVID-19 related payment breaks operate in borrowers’ best interests.

Through its ongoing engagement with the BPFI and the credit union representative bodies, the Central Bank is working to ensure that affected borrowers are supported through this unprecedented stress.

Payment breaks give customers the opportunity to postpone or reduce their repayments on their mortgage, personal or business loans, providing breathing space for borrowers from the severe income shock many households and businesses are experiencing.

At the end of the agreed payment break, the Central Bank expects borrowers who can return to full repayments to be given the option to either repay the loan within the remaining term or extend the term of the loan, noting that borrower circumstances and the appropriateness of each option may differ. The impact of both options on the overall cost of credit and monthly repayments should be fully explained to the borrower.

A payment break of six months will not specifically be identified on the borrower’s credit report recorded on the Central Bank Credit Register (CCR). The CCR does not produce a credit score and simply records the information that is submitted by lenders on a monthly basis.

For many borrowers, where financial difficulties are expected to be short term, an extension of the payment break from three to six months may be the most suitable support for them. For those borrowers who may choose to exit the payment break arrangements at any stage, the Central Bank expects lenders to ensure appropriate sustainable solutions, including forbearance, are available and to engage with borrowers as appropriate.

The Central Bank also expects lenders to prudently assess the level of distress in their loan books and for this to be reflected in provisioning levels, notwithstanding that provisions may not yet be taken at an individual borrower level.