Lawmaker proposes bill exempting old loans from foreclosure

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By Stelios Orphanides

While Cypriot banks are struggling with €20.6bn mountain of non-performing loans often involving cases of strategic defaulters, a draft law submitted to the parliament aims at rendering the already toothless foreclosure framework even less effective.

According to the Cyprus News Agency (CNA), the proposed bill, submitted by independent member of the parliament Anna Theologou and supported by the chairmen of socialist Edek Marinos Sizopoulos and of the Greens Giorgos Perdikes, will exempt immovable property from foreclosure if the agreements were signed before September 9, 2014.

Stelios Georgakis, a Central Bank of Cyprus representative who attended the meeting at the Finance Committee of the parliament on Monday warned that such a bill could affect more than half of the loans extended by bank, the CNA reported. Andreas Charalambous, the ministry of finance representative warned that the bill could have incalculable effects and added that supervisory authorities may ask banks to further increase their capital if they deem the foreclosure framework ineffective.

“If we don’t want other banks to follow the Co-op, we should take measures to support the appropriate management of non-performing loans,” Georgakis was cited as saying. He was referring to the government’s decision to sell the Cyprus Cooperative Bank’s healthy operation to investors after the lender made very slow progress in reducing its delinquent loans.

Half of the non-performing loans are terminated as borrowers are not cooperating with their bank and half of the terminated loans are secured with a home, according to Georgakis.

On Thursday, the Ministry of Finance officially unveiled a three-pillar strategy to reduce non-performing loans to below €13bn by the end of the year, which inter alia provides for, contrary to the provisions of the Theologou-bill, a tougher foreclosure framework and a scheme to assist vulnerable borrowers servicing their loans.

The 32-year old Theologou was initially elected as a member of the Citizens’ Alliance of ex foreign minister Yiorgos Lillikas when it entered three seats in the House two years ago for the first time.

She is a supporter of alternative economic theories including those of Greece’s ex-finance minister Yanis Varufakis who three years ago catapulted his country in an otherwise fully avoidable banking and fiscal crisis.

In 2013, depositors at Cyprus’s two major banks lost €8bn when the parliament voted down a Eurogroup proposal to recapitalise them by taxing deposits in the banking system. All political parties, including Edek and the Greens, voted down the bill except the ruling Disy which abstained the vote.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]