UPDATE 1-Czech ministry pushes for blanket loan payment moratorium at banks

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(Adds bank CEO comment)

PRAGUE, March 29 (Reuters) – Czech Finance Minister Alena Schillerova wants banks to put in place a blanket six-month moratorium on mortgage, consumer and company loan payments and said on Sunday she is readying legislation to present to the government this week.

The idea for the moratorium found support from central bank Governor Jiri Rusnok, who said that lenders could absorb the losses if the law was set properly.

Schillerova said on a Sunday debate show on Prima TV that she had been in contact with the central bank and would also consult with the European Banking Authority.

“I want to propose a moratorium, simply six months (during which) you will not pay anything,” she said.

Schillerova has already spoken to banks about the plans and is preparing to submit a bill to the government on Wednesday, she added.

Several banks have already implemented shorter moratoriums for people or companies hit by the drastic measures to contain the spread of the coronavirus.

The Czech Republic has shut down much of daily life by shuttering most shops and restaurants while large manufacturers have idled or limited output.

An estimated 800,000 Czechs cannot work because of the measures.

Czech National Bank chief Rusnok said he is in favour of the proposed moratorium, telling a separate Czech TV show that banks could not realistically administer loan payment postponement requests through case-by-case assessment.

He said the blanket moratorium could last three to five months and that during that time, rules obliging banks to create reserves for bad loans could be also relaxed.

“It is, of course, interfering in the banking sector, but at this moment I am convinced that if (the law) is reasonably calibrated, the sector would be able to absorb the losses,” Rusnok said.

The Czech Banking Association (CBA) has not seen the proposal yet.

“This information is new for us. We can only hope that the proposal tackles not only short-term, but also the long-term impact,” said CBA spokeswoman Monika Petraskova.

The chief executive of one of the two biggest lenders, Erste group’s Ceska Sporitelna, voiced reservations.

“We are convinced that the pandemic definitely did not affect all the banks’ clients… we don’t consider the proposal for a blanket moratorium to be economically effective,” Tomas Salomon said in a statement. (Reporting by Robert Muller; Editing by David Goodman and Andrew Cawthorne)

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