Cabinet to pass NPL laws ahead of Friday’s House debate

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By Stelios Orphanides

Finance Minister Harris Georgiades said that Cyprus had no other choice than to accept the European Commission’s conditions when it gave the go ahead for the sale of the Cyprus Cooperative Bank’s to Hellenic Bank, the Cyprus News Agency (CNA) reported on Wednesday.

Georgiades, who was talking to the members of the parliamentary finance committee a day after the cabinet approved a draft bill extending government guarantees to Cyprus Cooperative Bank assets acquired by Hellenic Bank as part of an agreed asset protection scheme, also said that the Commission gave Cyprus a three-month deadline to draft a business plan on the management of the Co-op assets that went to the possession of the government, consisting mainly of €6bn in non-performing loans.

The cabinet will also have to approve at an extra ordinary meeting on Thursday, chaired by the Speaker of the House of Representatives Demetris Syllouris, draft laws modernising the legal and judicial system which will help managing delinquent loans in the banking system, the finance minister said according to the CNA.

On June 19, the European Commission’s competition watchdog linked its approval to Cyprus’s scheme to sell the operations of the Co-op to Hellenic Bank to the condition that Cyprus would reform its legal and judicial system and so reduce non-performing loans in the banking system.

The finance minister said that the draft in question bills will be submitted to the parliament on Friday after being approved by the cabinet, the Cyprus News Agency reported.

The finance minister said that the cabinet had already approved Estia, the government’s scheme to help vulnerable groups with their mortgage repayment, which will be forwarded for approval in Brussels as it involves state-aid, according to the CNA.

Responding to questions by Disy leader Averof Neophytou, who also chairs the finance committee, and Diko leader Nicolas Papadopoulos, Georgiades said that it was not possible to submit only the bill on the state guarantees for the assets transferred to Hellenic without it being accompanied by draft bills on the management of delinquent loans.

The sale of the Co-op’s operations to Hellenic, signed on Monday, was made necessary after the lender made only slow progress in reducing its stock of non-performing loans, which accounted for roughly six tenths of its loan portfolio. Depositor concern over the bank’s capital adequacy prompted depositors to withdraw €2bn in the first quarter from the state-owned lender, recapitalised by the government in 2014 and 2015 with almost €1.7bn.

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About Author

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

  • almostbroke

    A piece of neat footwork , blame the Trioka !!!!

    • I saw this coming, sorry the nasty troika made us………

      • Bilbo Bawbag

        I agree, but at least they now have to do it…. probably.

        • divadi bear

          I am one of the lucky ones; I have no debt 🙂 I live with the belief, “If you don’t have the cash don’t buy it on borrowed money”, that is the best policy.
          Preceding that last “bail-in” when people lost thousands of $, I have kept my account here to what I need for two months. I’m glad I did. Fortunately I saw the trouble coming and lost nothing. My “two month plan” is still operating and my little excess is safe in my German bank.

          • Sandie

            The same here, only our little nest egg is in safe The Netherlands.

          • Monica

            Keeping one’s cash away from the EU’s grasp is a better bet at present !

          • divadi bear

            Monica.
            Big things are happening right now within the EU. The “Open Border” situation has caused so much trouble that it looks like some will follow The UK plan and get out !
            The banking in the EU small countries is causing concern, following that The E Union will notice many difficulties so it’s only a matter of time before the EU will take a painful slap ! I can see it coming then it will be every man (country) for themselves !

          • Monica

            That is a possible outcome.
            Summit starts at 3pm and Press Conference at approx. 7pm today (unless Barnier & Co. ‘chicken-out’ again).

  • A is B

    Its not our fault, never is.

  • Kevin Ingham

    To summarise the situation Cyprus finds itself in, it had to give illegal assistance to a bankrupt bank in order to prevent a complete wipe out of it’s banking system (and economy)

    It is now faced with implementing a proper foreclosure procedure that will shut down 1000’s of businesses and repossess 1000’s of homes unless these borrowers start repaying their bills. That will cause a huge spike in unemployment and numerous other social problems if they don’t repay the money, and a collapse in consumer spending if they do. It’s real “rock and hard” place stuff

    • Cydee

      It’s well-past time this behaviour of ‘I’ll pay if I feel like it’ stopped. a) it’s not fair on decent people who ‘do’ pay their debts and b) there certainly wouldn’t be any more handouts from EU if nothing is done – now.

      • divadi bear

        Cydee.
        Hear ! Hear ! Hear !

    • BearFace

      In a wider context, the truism is that solutions can be effective, quick or low-cost – but certainly not all three. In the current situation it looks like effective is the very best one could hope for: it’ll take time and there will be economic pain.

      None of the players want foreclosures to be a widely-used sanction (way too disruptive) but the threat of foreclosure must be real for borrowers (and guarantors) to finally get the idea that loan agreements must be honoured. Much is about perception and some well-targeted blood-letting will be inevitable to get the point across (no point in making threats if you aren’t seen to follow-up on them) but racing into repossession of thousands of homes and thousands of creditors’ liquidations is in nobody’s interests and won’t be the approach.

      Initial focus should be on strategic defaulters as there is blood in those stones and they are best placed to avert imposition of ultimate measures (or withstand them if they are dumb enough to allow it to come to that). Start by getting heavy with the big strategic defaulters (where the biggest bang for the buck is to be found and ‘setting an example’ has a high-profile impact) while also providing advice and practical support (including rescheduling) to the (private & struggling) minnows who find themselves in a rapidly-drying puddle.

      • divadi bear

        Bear Face.
        That is the solution I would implement too !!! Shock them into transferring their well stored cash in foreign countries under the name of a family member back to Cyprus to pay their NPLs !!!
        No one person should be exempt, not the president nor MPs !

  • Costas

    Turkish Cypriots never performed in any matter of the term also known as Personal finance. In fact they have even less than the GC and the TC never had to work hard for their land

    • The Truth

      Total shite

    • Sonar

      How the hell did you drag the Turks in to your Problem of borrowing money and not paying it back . Try doing that in North London or have you borrowed money in Cyprus and absconded it to the UK, you are unbelievable

  • Jeremy Rigg

    I honestly dont know whether to laugh or cry. All this trouble is largely self-induced by inept, incompetent,self important idiots that call themselves politicians and lawyers.
    Talk about “bring on the clowns”……………….outrageous.

    • SuzieQ

      Don’t mince your words, Jeremy. Please say what you really mean 😉

    • BearFace

      On the plus side, govt. has three months to draft a business plan on the management of the Co-op assets it adopted. A little breathing space in which to apply the collective mind to come up with a well-formed solution for the (hitherto) apparently intractable problem. Surely the best and brightest in govt. have, with the benefit of external expertise, been working on this behind the scenes for quite some time already.

      Unfortunately, you’re right and there is no evidence that govt. has the knowledge and competence to devise a credible, comprehensive, equitable, workable plan (even in a time-scale of many years) whereas there IS evidence that it has neither the will to create the legal framework and environment necessary to fully implement such a plan nor the intent to actually implement same.

      Still, given enough fine words, smoke, mirrors and prevarication the govt. can get what it wants in the short-term without ever having to actually do everything that has for so long been so desperately required, can’t it???

    • divadi bear

      Jeremy:
      Just laugh providing you don’t have much money in the BoC ! I am laughing 🙂 My dear (sadly passed on), husband didn’t trust ANY Cypriot bank and I don’t either ! He, and now I, have only ever kept two times the amount of money in the CY bank to cover the monthly bills. I keep my little nest-egg in the Deutsche Bank at home in Germany.

  • SuzieQ

    Perhaps they’ll play for time-the NPL may just be unconstitutional. It’s time they haven’t got….

    • divadi bear

      SuzieQ
      I always understood that it was “healthy” for a bank to have reasonable NPLs.
      , list. Why is it here “unconstitutional” ?

  • Barry White

    Kyproulla ist kaput !!!!

    • Evergreen

      seems so.

  • Bruce

    Minister Georgiades is being most economical with the truth. Many elements of the Hellenic Bank-Coop deal were opposed by the ECB and the European Commission including the issue of Development Bonds of 2.35 billion euro in early April 2018 and the placing these bonds and matching theoretical deposits on the balance sheet of the Coop. Public Debt Management laws were violated in not informing the House about the Development bond issues.
    Hellenic now holds 4.5 billion euro of Government bonds backed by considerable phantom deposits.Coupon interest from the Government on these bonds should amount to around 110 million per annum as well as interest from performing loans, are unlikely to be enough to offset the costs associated with increased provisions on its NPLs and even on “high risk PLs” of 2.1billion euro.

  • comments-on-mail

    Thank god we are an EU Member State. They are incapable of fair, prudent and forward looking policy making. All the correct decisions are dictated by the EU. Had we not been an EU Member State they would have dragged the country to the brink of bankrupcy again to serve their micro political interests and certain groups of people. At least the government has been kicked out of the Coop and let’s hope so that the EC will make sure that there will be an orderly disposal of property and strict oversight in relation to the citizenship program that will contribute to deflating the skyscrapers bubble.

  • Barry White

    The bollocking given to the government by the EU over the Coop collapse is now dribbling out.

    Panic stations as usual by the loose legislators. Once again, the inept ones have boxed themselves into a corner.

    Clear proof if needed that the ROC is not fit for purpose and needs to enter into a decade long rehab with only qualified foreigners fully in charge.

    We can watch with interest as the government and financial sector heads down the gurgler yet again as the world shrugs.

    Has anyone seen or heard from the AWOL Leader on the latest disaster?

    Will the next upcoming Russian loan repayment be the catalyst for the unravelling of the Republic?