The signatory Associations of the 2019 Credit Agreement publish a simple guide for companies on the new European provisions on the definition of default.
The main associations representing companies - Alliance of Italian Cooperatives (AGCI, Confcooperative, Legacoop) CIA-Italian Farmers, CLAAI, Coldiretti, Confagricoltura, Confapi, Confedilizia, Confetra, Confimi Industria, Confindustria and Rete Imprese Italia (Casartigiani, Cna, Confartigianato , Confcommercio, Confesercenti) - and the ABI have defined a guide on the new European rules on the definition of default that banks will be able to start applying starting from next June and in any case by the deadline of January 1, 2021.
Until now it was envisaged that the bank should classify in default the company which, for more than 90 consecutive days, is in arrears of "significant" payment on the payment deadlines provided for in the bank loan.
The new European rules quantify the concept of "relevance", setting the threshold beyond which the company must necessarily be classified in default.
The bank will be required to determine the default of the company if it is in arrears of payment, for more than 90 days, on amounts greater than 500 euros (overall referred to one or more loans) and which represent more than 1 % of a company's total exposures to the bank. For natural persons and small and medium-sized enterprises, exposed to a bank for loans below 1 million, the amount of 500 euros is reduced to 100 euros.
Furthermore, unlike in the past, active margins of the company available on other credit lines cannot be used to compensate existing arrears and avoid classifying the company as a default.
It is therefore essential that companies know the new rules, in order to avoid being classed in default even for small unpaid installments. To this end, the Associations publish the guide on their sites from today.
The initiative of the guide on the definition of default arises as part of the work of the Interassociative Sharing Table on International Regulatory Initiatives (CIRI Table), set up by the same Associations in accordance with the 2019 Credit Agreement with the aim of sharing positions and initiatives and municipalities on European and international regulations that can impact on companies' access to credit.