Home owners protection, NPL management body passed, Co-op board quits (Update-2)

37

(Updates with background in fifth paragraph)

By Stelios Orphanides

The cabinet on Tuesday approved, Estia, a scheme designed to help struggling households repay their debts, and the entity that will manage bad loans, the government spokesman said.

Ministers also accepted the resignations of the co-op bank board of directors who will however, stay on until the deal with Hellenic is completed, spokesman Prodromos Prodromou said according to the Press and Information Office.

Estia provides for an adjustment of the loan balances as part of restructuring “to the value” of the mortgaged residence and an adjustment of interest rates within the range of 3.5 per cent and 2.5 per cent, he said.

The scheme also includes a long-term repayment period of the restructured loans and subjects applicants to “strict income and wealth criteria,” Prodromou said. Family income should not exceed €50,000 a year and the net value of other assets should not exceed 125 per cent of the value of the mortgaged residence.

According to the scheme, the net value of a household’s assets also includes the primary residence and other loans, in addition to the one in question. Applicants must be Cyprus residents over the past 10 years. The number of beneficiaries of Estia is estimated at around 15,000, which accounts for loans worth €3.4bn.

Beneficiaries of Estia will have one-third of their monthly repayment subsidised by the government, and have to pay the rest two thirds themselves, the spokesman said. The scheme will not be restricted to housing loans but will also cover business loans which have a residence as collateral.

Prodromou said that the Land Development Organisation, a state-sponsored entity tasked with the construction of social housing, will be managing Estia and will apply concrete criteria in selecting beneficiaries.

The 2019 budget will allocate “slightly more than €30m” in funds for Estia, Prodrmomou said, adding that the staff of the non-performing loans administration panel will not be appointed by the government.

The Land Development Organisation will enter an agreement with the non-performing management body, other banks, and bad loans management entities in the future, after pledging to adhere to Estia’s standardised loan restructurings, the government spokesman added.

“Loans will be automatically restructured to become manageable with the state contributing one third,” he said.

Prodromou said that the cabinet also approved the establishment of a body that will initially manage the Cyprus Cooperative Bank’s non-performing loans, worth €7bn, that will be under state ownership. Assets from other banks could also be added later.

The cabinet session took place against the backdrop of a run on the co-op by jittery depositors, spooked by statements that the bank could go under if the deal with Hellenic didn’t go through. Concerned Co-op depositors continue to withdraw funds from their accounts, with some of them already queuing at Hellenic Bank to open accounts amid uncertainty over whether the parliament will give its go ahead.

“The Finance Minister informed the cabinet that the board of directors of the Cyprus Cooperative Bank has submitted its resignation which was accepted but the board was asked to remain in place during transition until the non-performing loans management body is set up,” the spokesman said.

He also said that revenue from the non-performing loans management body will help cover the fiscal impact of Estia, the scheme designed to help vulnerable borrowers, and also help reduce public debt.

Private equity may also participate in the delinquent loans managing body based on terms serving public interest, he said, adding that the cabinet authorised Finance Minister Harris Georgiades to go ahead with the procedures required to set up the body.

The cabinet also asked Georgiades to immediately task an independent agency, if not the International Monetary Fund, with designing the body’s operational framework and an independent agency to evaluate that agreement or to select a new company to manage the loans, Prodromou said.

As a result of the €2.4bn issue in favour of the Co-op in April, public debt, which last year fell to 97.5 per cent of gross domestic product (GDP), once again rose beyond the 100 per cent mark. As part of the agreement signed by Hellenic Bank and the Cyprus Cooperative Bank more than two weeks ago, the government is required to issue €1bn in guarantees in favour of Hellenic to shield it from possible impairments resulting from underperforming assets acquired by the state-owned Co-op.

The European Commission said on June 19, that for it to approve the agreement, Cyprus will have to modernise its legislation and judicial procedures to help banks reduce their non-performing loans totalling around €22bn and making up 45 per cent of the total. Opposition parties criticised Hellenic’s deal with the Co-op which provides for the transfer of its operations, including €9.7bn in deposits, for a consideration of €74m, for being unfavourable to the state which recapitalised it with €1.7bn.

Diko, the second-largest party in the opposition bloc, with which ruling Disy could form a majority and pass the laws, said that it would do so only with the submission of a bill on Estia and the government agreeing to concessions demanded by its chairman Nicholas Papadopoulos during a meeting with President Nicos Anastasiades on Monday.

Parliament is expected to vote on all the bills on Friday after they are reviewed by the finance committee.

With the government reliant on Diko’s support, a spokesperson of the party said earlier that its support should not be taken for granted.

While Anastasiades aready agreed on Monday in a letter to Diko’s proposals, “written assurances were insufficient,” said Diko general secretary Athos Antoniades. He also said that his party insisted on the immediate assumption of the political responsibility for the co-op’s failure which is directed at the bank’s top executive Nicholas Hadjiyiannis and indirectly at Finance Minister Harris Georgiades, his close friend.

With the resignation of the Co-op’s board, which also included Hadjiyiannis, this obstacle appears to have been also lifted.

Antoniades also sent a message to Disy chairman Averof Neofytou saying that the latter’s “flattery” was not satisfying Diko.

Share.

About Author

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

  • Bob Ellis

    Summary : Taxpayers are screwed once again.

    • Copernicus

      PAYE tax payers not the firms with smart accountants ;))

      • Cydee

        of Offshore accounts.

  • John Henry

    Statistically I have no choice but to believe that many more people owe then have saved. I conclude this because if I owed, I’d vote for these MP’s over and over, however, if I had savings at the very least I’d be out throwing fruit at them. With their continued re-election its clear these MP’s are indebted to those in debt.

  • Barry White

    Oh Dear……………., it seems that this bit of news was overlooked or dropped off with Ms. C`s latest Post-it note.

    “The European Commission said on June 19, that for it to approve the agreement, Cyprus will have to modernise its legislation and judicial procedures to help banks reduce their non-performing loans totalling around €22bn and making up 45 per cent of the total.”

    • SuzieQ

      You’re not-picking again, Barry dear 😉

  • jobanana

    Can I have 1/3 of my mortgage paid by the government too? I guess not since this only applies to those who don’t play by the rules and pay their bills! What a joke this is!!!

    • Didier Ouzaid

      Did you at least have the courtesy of strategically defaulting?

  • Didier Ouzaid

    “the government agreeing to concessions demanded by its chairman Nicholas Papadopoulos during a meeting with President Nicos Anastasiades on Monday.”

    What are these concessions? Did I miss them? Yesterday’s article breaking that news didnt appear to specify either.

  • Debbie Parperi-Phylactou

    What a joke! Seriously, a family income of 50 k, is 4000 a month and they can’t pay their loan? Obviously a move ti protect their own NPL. As the great Judge Judy says, “when you owe money, go work in McDonald’s, sweep roads if you have to, no one owes you anything”. If we are told we can survive on €850 a month, what does 4000 get you apart from a free ride on taxpayers money when your busy not paying back what you borrowed whilst driving around in luxury cars and holidaying abroad to ease your suffering. 4000 can get you a nice place to rent whilst the depositers get their life savings back instead of a haircut to keep you in luxury!

    • Neroli

      I absolutley agree with you! This is disgusting! When some people here work 3 jobs to pays off their loans (honest people) this scum get let off, and still protection of the primary residence.

      • Debbie Parperi-Phylactou

        Yep!

  • Barry White

    Lovely, with a say €300,000 primary residence and €50,000 a year coming in, and other assets of €375,000, you can get part of the mortgage knocked off for good, reduced interest rates and the taxpayer will pay 1/3 of your mortgage payments.

    What chance for the Non-Cypriot pensioners and workers getting onto this little earner? Or is that a rude question or one for the European court.

  • Slinkymomo

    WHAT?? So tax payers have to pay for 1/3 of non-payment of mortgaged homes???? Also any so called developers whose assets are never theirs but their relatives’ and/or another company partners’ ……Oh they also must be CYpriot citizens……. I wonder how do the Russians and Chinese tax payers feel about this????

    • Neroli

      And British tax payers!!

    • Colin Evans

      Not very happy at all, but who do I complain to about the Tax payments I have made being squandered on many, many people that have made a conscious decision not to pay, but, in reality could pay if push came to shove?

  • cypbychoice

    OH dear need a bigger house , oh dear need a bigger car , oh dear need a holiday , go to the bank get a loan everybody did .Now crunch time no one wants to pay it back, leave it to the taxpayers they will pay it for us, and the government dick heads vote for this to happen.
    No where else in the world would this happen, can not pay take it away . HARD LUCK ,pay your dues

    • Neroli

      Remove all their assets

      • Cydee

        And auction them to the highest bidder.

  • Home OWNER ?

  • Yeah 1000 a week and below you are vulnerable WTF

  • Bruce

    But Hadjiyiannis has not offered his resignation from the most important position of CEO and can continue to be the loyal poodle of Georgiades.

    • Neroli

      They both need to go!

  • almostbroke

    And how will all this affect the N P Ls ? The place is sinking under a massive weight of debt and no one wants to pay what they owe !

  • scotontherock

    Am really furious about this.
    What about all of us who cut back on spending so that we could pay these loans properly. Are we to be rewarded for sticking to the deal?
    Should have done what other did and stopped paying and see the debt being reduced.
    It seems that if you pay as you should you get penalised – if you don’t, you are rewarded.

    • Philippos

      This is Cyproos. Don’t worry, it will ALL end soon, There isn’t a bottomless pit of money or borrowing ability and as tourism turns down and someone wakes up to the fact that our “Product” is now way outside the mainstream of the market, drought, environmental devastation and complete disregard for reality will expose the crumbling of the economy which will come into sharp focus and then you can complain again as the rats abandon the sinking ship and become reunited with their ill gotten millions in a successful European Country

      • scotontherock

        Yes, but we will all end up paying for all this mess.

        • Philippos

          Yes, and it is right that we should. We don’t care, we don’t participate, we shout but don’t complain effectively and just look at what we elect as Municipal Councillors and Mayors and Members of Parliament. We are sheeps and we deserve to get slaughtered. When did you last give your MP or local councillor a hard time, face to face, to express your views as a Citizen or “Dimotis” (Which includes EU Member State Citizens)?

          • scotontherock

            Coming from the UK we can and do vote in local elections but as I understand it we are not allowed to vote in government elections. If we could I suspect politicians would have a much harder time and have to take account of our views.

          • Philippos

            May I congratulate you on having registered to vote in Cyprus, to the extent that you can do so under EU / Cyprus Law. Many EU Member State Nationals living permanently in Cyprus do NOT KNOW that they can do this and that it is easy and free at your District Administration Office. You just need your MEU1 or 3 and your passport (Help by taking copies to give in with your simple form that is also in English). Whereas you cannot vote for Parliamentary or Presidential Elections, unless you are a Cypriot Citizen, you could join The (Government) Political Party to make it easier to meet M.P’s and Ministers and try and exert some influence that way. Its not easy if you do not speak Greek, but if you are strong enough in character, it is probably worth a go. I know people who have and who “Buttonhole” elected representatives frequently.

  • Philippos

    You just know that this is going to fail or become the seeds of another “Skandalo”. A very difficult and complex series of tasks being given to people without experience in bankruptcy, liquidation and “underwater” distressed asset management. As for “Valuers’, the same story, we don’t have a long history of valuing distressed assets and the market is losing its stability and in the forseable future will be the subject of “New” Trends, like the DTA Adjustments on Former Government and Military Employees receiving a pension in CY. which i suspect will reduce demand for “Retirement Homes”, or send them all to North Cyprus where value for money is very evident.

  • This is some sort of alternate reality. Loans, mortgages and guarantors are all very clear in their obligations. It’s not my fault authorities let it build up over decades.

  • costaskarseras

    Only a few months ago Mr. Klaus Regling, Managing Director of ESM was proudly praising the government and singled out Mr. Georgiades who “masterminded” Cyprus’ economic recovery by saying that: “It is with great pleasure that I return to Cyprus each year. Every time, I see more progress. When I first came to this conference, Cyprus was part of an ESM programme. A year ago, it had just successfully concluded it. Now, Cyprus is one of Europe’s best performers. It’s growing at one of the fastest rates of the euro area”.

    It is time for the Cypriots and other EU people to ask themselves, where these wise men of Brussels are leading us. Yes, it was very difficult having to deal with consequences of the NATO-Turkish invasion in 1974. But Cyprus’ economy had recovered ten years later and it was in better shape than it is today after the worldwide economic crisis and under EU directions.

    The Co-op bank is an organization which was established to serve the working people and it did so for over 100 years. However, it is seen In Brussels as an unwelcome competitor and has to disappear. For the lucky but very nervous people who have savings, the return is only 0.8% and the Estia interest rates will be within the range of 3.5 to 2.5%. The so-called Home Owners Protection Plan is not an effective law but just a plan. This gives the Cypriot people the opportunity to establish a new Co-op bank and AKEL is studying this possibility.

    The government and their friends in Brussels are only playing for time and hope for the best. With respect for those who have impaired vision, but the government is giving the impression that the blind are leading the blind.

    • Neroli

      So you agree with these people helping themselves to depositors money for houses they can’t afford and not paying the loans back?? Try that trick in UK!!

  • Sonar

    What is the average gross wage per year in Cyprus?

    • Cydee

      And how easy would it be for Estia to turn a strategic defaulter into a ‘distressed home-owner’.
      Usual story of the size of the b.e.

  • Cydee

    This stinks to high-heaven of rusfeti; of helping ‘unfortunate friends’……as someone else said – it’s heading for 2013 all over again.