Portugal will give state guarantees for part of the corporate loans that banks may need to restructure in the sectors most hit by the COVID-19 pandemic, such as tourism and retail, if companies are unable to start repaying them after September.
Economy Minister Pedro Siza Vieira said late on Wednesday that “these state guarantees will ease the capital effort that banks will have to accommodate for the restructuring of these loans they agree with their customers”.
The volume of loan repayments suspended by Portuguese banks under a scheme to help businesses through the pandemic reached 24 billion euros in January, or 33.2% of total corporate loans.
The freeze, aimed at avoiding a jump in bad loans at banks that spent the past five years reducing their ratios of non-performing loans, will end on Sept. 30.
“We have to face the end of these moratoriums with realism, but with some confidence for most sectors. Our concern is in the sectors most affected by the pandemic – tourism, retail and culture,” Siza Vieira told an economic conference.
Hospitality was the sector that resorted most to these moratoriums, with hotels and lodging companies suspending 3.5 billion euros of loan repayments, and restaurants 1.5 billion euros.
“We are able to accommodate loan restructuring in these sectors. The state will guarantee part of the debt on condition the banks grant the needed grace payment period and the adequate extension of the maturities of loans,” Siza Vieira said.
Portugal’s recovery programme also envisages 1.3 billion euros to reinforce companies’ capital and 8.5 billion euros of state-guaranteed loans, with grace periods until between December 2021 and September 2022, he added.