Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether it is (a) a regulatory requirement or (b) a bank decision that a company goes into forbearance automatically if it has four quarters of capital repayment holiday on its bank loan.

Most business lending - including lending to incorporated entities - is unregulated. The Government is committed to regulating only where there is a clear case for doing so, in order to avoid putting additional costs on lenders that would ultimately lead to higher costs for business customers.

Payment holidays are a form of forbearance and, where the credit is regulated, firms will need to have appropriate policies and procedures in place to treat customers in default or arrears difficulties with appropriate forbearance and due consideration.

The specific type of forbearance offered, including a capital repayment holiday, is a decision made by the lender, as well as how long the forbearance is provided before additional forbearance or litigation action is taken. A lender may choose to review the forbearance offered at a certain point in time to see how successful the forbearance has been.

Furthermore, regulators have also set out their expectations of financial services firms and information for businesses and consumers in the context of COVID-19, to ensure markets continue to function well.