In the weeks of 2020 affected by the pandemic, the number of insolvency and restructuring filings was in line with the historical average. In the first half of 2020, the number of filings was 27% below the historical average.

There were various factors with opposite effect on the number of insolvency and restructuring filings. In the first state of emergency, a period of strong restrictions to movement and to the functioning of courts, the number of filings dropped by 10%. The second state of emergency and the suspension of the obligation to file for insolvency had a small effect on the number of new filings. There was an increase in the number of filings in the sectors that were the most exposed to the pandemic in the weeks of 2020 affected by the pandemic, in comparison to the pre-pandemic historical average.  In the other direction, the credit moratorium reduced the probability of insolvency for firms. A natural experiment shows that the moratorium reduced the probability of insolvency for the firms included in the experiment from 6.4% to 3.9%.

For more details see Nogueira (2022), “Corporate insolvency and restructuring during COVID-19”, Banco de Portugal Economic Studies, Banco de Portugal, Vol. VIII, No. 3, pp 1-26.

Prepared by Gil Nogueira. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of the Banco de Portugal or the Eurosystem.

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