(Adds background in fifth paragraph and Papadopoulos comment in thirteenth paragraph)
By Stelios Orphanides
Finance Minister Harris Georgiades said on Monday that his ministry will incorporate Diko’s suggestions on the management of bad loans into proposed legislation changes and present them to President Nicos Anastasiades.
“We have noted the positions, the concrete proposals of Diko related to the problems of our banking sector, with the changes that need to be put forward in the legislative framework concerning the operation of the loan management body and the operation of Estia,” Georgiades told reporters after Diko chairman Nicholas Papadopoulos met Anastasiades.
Estia is a scheme aimed at helping vulnerable households to repay their loans by subsidising their monthly instalment.
The government needs a majority in parliament ahead of critical votes for the future of the banking sector. This includes the extension of guarantees to Hellenic Bank to allow the acquisition of the operations of the Cyprus Cooperative Bank to go ahead. The government also requires a majority to pass changes in legislation concerning the management of loans, a condition set by the European Commission in return for its approval of the Hellenic-Co-op deal.
The council of minister last Thursday passed a bundle of draft bills which it forwarded to the parliament aimed at strengthening the banks’ tools in reducing non-performing loans. The proposed amendments include incentives to borrowers to repay their loans and penalties for those who fail to do so.
The government can currently rely on the 18 lawmakers of Disy in the 56-seat parliament and needs the 10 votes of Diko deputies. One of the seats in the House remains vacant after the supreme court cancelled the election of a Solidarity representative.
If the Hellenic-Co-op deal goes ahead, the government will receive the bulk of the Co-op’s non-performing loans, the collateral of a €2.5bn deposit it made in April and transfer it to the non-performing loans management body. At a later stage, the latter is likely to absorb bad loans also from other banks. Non-performing loans in the Cypriot banking system account for roughly €22bn or roughly 45 per cent of the total.
“The government approves these proposals; they are going to a right direction, the same direction that I believe we must collectively move in the coming days,” the finance minister said.
This, the finance minister continued, would allow the banking sector to stabilise and restore depositors’ confidence.
This confidence reached a new low following the 2013 banking crisis when Co-op customers withdrew tens of millions of euros on fears politicians would vote down the bill on the guarantees to Hellenic, which would lead to the resolution of the Co-op, the state-owned lender with about €9.7bn in deposits.
“The finance ministry will process and incorporate Diko’s remarks which are going in the right direction and are accepted (and) serve the general purpose,” the minister said and added that Anastasiades will respond to Papadopoulos officially and by Wednesday, the cabinet will approve the draft bill on Estia and the operation of the non-performing loans management body.
Papadopoulos said that Anastasiades viewed Diko’s proposals “positively”.
His party, which initially supported Anastasiades when he first took office in 2013, named in a letter to the president “concrete ways to improve and strengthen the insolvency framework, the protection of primary residence and guarantors” and addressed issues such as abusive clauses of bans, improvement of judicial processes “that will extend the necessary protection to borrowers but also mainly, proposals on the management of non-performing loans, the reduction of private lending” and the body managing delinquent loans, Papadopoulos said according to the Cyprus News Agency (CNA).
That body will have to be completely separated from the government to shield it from political interference, he continued, adding that foreign experts with knowledge in asset management should manage it.
The Diko chairman also asked for the resignations of all those responsible for the management of the Co-op, into which the government injected almost €1.7bn in taxpayers’ money in 2014 and 2015.
The finance minister declined to comment on the Diko chairman requesting resignations.
The chairman of the finance committee of the parliament, Averof Neofytou, also the leader of Disy, said that the committee would have to meet day and night over the next three days so that the bills can be put on vote on Friday.
“Tomorrow, the day after tomorrow and on Thursday from morning to midnight if necessary,” Neofytou was quoted as saying by the CNA.
According to the website of the Parliament’s, the finance committee is scheduled to meet on Tuesday to review changes in the laws on the transfer and mortgage of immovable property, the sale of loans, insolvency, insolvency consultants and companies.