Georgiades says government accepts Diko’s NPL proposals (Update-1)

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(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.

 

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

  • Mint

    Here I come to save the day!

    • Bob Ellis

      Which foot will he put in his mouth first ?

      • Mint

        Both, the guy is skilled!

        • Barry White

          A true multi-tasker just like Dad.

    • Cydee

      Whose day? His mates, obviously…

  • almostbroke

    Babydop !!!!! His family lawyer business was the biggest ‘laundromat ‘ for despots hiding their money in Cyprus some years ago . He had since moved on to his lawyer office share of the ‘passports for citizens’ scheme ( scam ) not the top ‘one stop shop ‘ in this scheme , that’s reserved for Nic ‘s lawyer office . So anything they propose should be taken with a grain of salt !!!!!!

  • Bob Ellis

    Baby Pap, like most here he still believes we have a choice when it comes to our toxic economy. We may think we hold a royal flush but the rest of the world knows we have 2 aces. Betting heavily at this point or trying to bluff will just make the loss that much more spectacular.

    • Barry White

      I hear a flushing sound, Bob, but I don’t think it is a suite of cards.

  • Cydee

    Dear god – talk about out of the frying pan/into the fire. The outcome of this is going to be Disaster no.2.

  • Copernicus

    Nicholas will get more than we read or is published and he knows how to play his hand. The government cannot get House approval without his support and he will call the shots until the very lat minute. Georgiades has no option than to support and get it through or resign but his arrogance will not allow him to resign and take responsibility like Sarris. Georgiades is now a prisoner of his own making and go for it Nicholas.

    • Perhaps they will decline to vote like last time ?

      • Copernicus

        No chance. Last time they were naive to think they could affect the eurozone hence their heroic NO. Papadopoulos knows better and he will extract blood to vote YES which he will as the alternative is resolution of the CO Op and they would not want the responsibility.

        • But the plan is flawed either way it’s doomed right ? Papadopoulos is the scapegoat in this outcome.

          • Copernicus

            The deal to sell to HB is not flawed and it is similar to what happened in the UK where the government offered an asset protection scheme. The difference here is that the liabilities had to be covered by same amount in assets. The Co Op is split and the question is whether the government will bring in overseas asset managers to work on the recoverability of the NPLs. Given that the government has bought these NPLs at 30% of fact value of the loans there is scope, over 15-20 years, to recover at least 50% of the 7.5bln NPLs bought. I think that with a more strict foreclosure law some of the distressed borrowers who can pay will be swiftly dealt. The primary residence can be dealt with sale and lease back with the borrower paying a rent until he is able to use a call option to buy back his property, even with a 20-30% write off it will still be good for the government.

      • Barry White

        The traditional, the next deal will only be better, Cyprob gambit. It never worked but they just keep hitting their heads on the brick wall.

  • SuzieQ

    I’d love to know what are the proposed “incentives” to repay a loan.

    • Keep your home 😉

    • Neroli

      What about subsidising those who always pay on time! And how many of the ‘won’t pay brigade’ will suddenly become ‘vulnerable householders’ they make me sick!

    • Barry White

      First step is to check your passport to see which gate that you enter.

  • Subsidising = taxpayer. Surely better to spend the money on social housing (council houses). If they cared about the genuine defaulters who are struggling this is the best option. Anyway this is ridiculous the troika won’t but it. The rules are clear a state cannot use tax payers to prop up an insolvent bank. Prepare for bail-in 2.0 i see no other route.

    • Disenchanted

      The Commission has already approved state aid to liquidiate the coop bank using national legislation. Get your facts right before pontificating.

      • State aid to liquidate not subsidise ? Do you think the troika will buy it then ?

        • Disenchanted

          Mate, there is no troika anymore! The programme ended in 2016. That’s why there is a mess. The government of Anastasiades is hopeless without the troika.
          The Commission has approved the state aid subject to many conditions, including the strengthening of the foreclosure legislation. Read Barry’s comment above.

          • Right ok, so no supervision then do as you like seems to make sense now. I just hoped someone with some sanity could take control.

          • Is this strengthening ? I suppose compared to before it is slightly.

      • Barry White

        It is clear at least from the grudging admissions now being dragged out of the Minister of Finance and cast of financial illiterates in government that the Commission approves subject to a series of conditions precedents on NPL and foreclosure regulation being swept away and normal ones put in place.

        There will also be a suffocating timeframe as part of the deal for every thing to be put into law before a final approval.

        Hence the total panic trying to inject loopholes into the legislation and pass it. The Commission well understands that the Cyprus government has not met its previous commitments. As was stated by the spokesperson, it is all subject to the review and approval by the Commission.

        The Elite is filling in the time delays to move their many millions offshore leaving the taxpayers holding the bag.

  • The Truth

    It’s going to go ‘Ti*s up” and everybody else will be to blame as they cry and moan.

  • Cadmus

    In Kurtz’s very well written comment there is a key phrase, “… the market is hugely overvalued “.
    The selling of property for passports is making a bubble even worse. Outside of Limassol there is very little movement because people cannot accept they have negative equity and the banks cannot foreclose. Either house prices collapse or the banking sector will.

  • flange

    they are right in asking for the resignation of all those incompetent fools mismanaging the coop for the last 5 years…. the EC has asked for foreign professional managers specializing in NPLs otherwise the corrupt system will not allow any progress until the next bankruptcy

    • Bruce

      And foreign competent professional managers should be recruited as well to manage the “good part” of the Co-Op Bank rather than placing it in the hands of the dubious major shareholders of Hellenic Bank such as the Directors of Demetra and Logicom whose record in managing financial resources has been poor.In this connection set up a new bank productively and prudently using the healthy part of the balance sheet of the Co-Op Bank that was headed to Hellenic Bank.

  • Barry White

    Prez Nik, Baby Dop, the Disy ostrich, the AKEL throwback, etc etc. PIffle.

    This looks like a job for the return of the ample ended Village Idiot, all stand for the one and the only ` The Tof` !!!!!!!

    “What would you think if I sang out of tune
    Would you stand up and walk out on me?
    Lend me your ears and I’ll sing you a song
    And I’ll try not to sing out of key
    Oh I get by with a little help from my friends
    Mm I get high with a little help from my friends
    Mm gonna try with a little help from my friends…”

  • costaskarseras

    The support DIKO gave to Anastasiades in the two presidential elections was disguised as an abstention. The additional support DIKO has been giving to the government is part of the “deal” to install Mr. Papadopoulos as the next President with the support of DISY in return for services rendered. This political opportunism should not go unnoticed and without being punished by the electoral. In the event that the Parliament betrays the working people by taking their family’s home, they will have no alternative but resist and defend their homes with the support of the Cypriot people.

    • almostbroke

      The fundamentals are Costas if you borrow money , you pay it back with interest, that is a universal law since the lending of money was instigated ions ago , but in Cyprus in particular they are trying to circumvent a universal principal using the old tried and trusted ‘making up the rules as you go along ‘ the call is ‘no lost votes ‘ , we will do what it takes even if it means collapsing the economy safe in the knowledge that those ‘in the know ( and that includes AKEL) have moved their assets out of the country long ago !!!!

      • costaskarseras

        You don’t have to tell me and other working people that when we borrow money we have to pay it back. That rule under capitalism only applies to the working people on a global scale. As you know, the bankers and other parasitic rich people are excused from this responsibility, when they spend money they didn’t earn or that belongs to them. Very conveniently the working people are made to pay their debt and that is why only a handful of countries do not have a huge national debt.

        • almostbroke

          The universal law of borrowing applies to Capitalism or Socialism , what you borrow you pay back , if certain people chose to circumvent this universal law well that’s another matter .

        • Abram

          when the law prevails, everyone borrows money pays it back regardless of his name, size, kmobaros, working, businessman or else.
          in kyprolla, it is a different story and we have this silly discussion

          • costaskarseras

            Do you include the banks? or you believe that the banks shouldn’t pay their debts. Only the little people, the victims of the bankers’ economic chaos must pay, even with their family home.

    • Abram

      “Working people” a general term for a segment of the population but this term and this segment are used for gaining political power and benefits at the expense of the so called “working people”.
      The whole system needs cleansing.