(Updates with more comment and background in third and tenth paragraph)
By Stelios Orphanides
Chairman of the parliamentary finance committee and president of Disy Averof Neophytou said that a number of political parties have agreed to give borrowers the right to challenge foreclosures in court in fast-track procedures which may allow the formation of a majority faction in parliament.
The inclusion of this clause followed an intervention from Diko chairman Nicholas Papadopoulos which led to ‘an updated and final document’ being prepared, on which President Nicos Anastasiades is expected to comment in writing, Neophytou told reporters on Friday after a meeting of the finance committee which reviewed the proposed legislative amendments.
Hours later, Neofytou said that Disy and Diko are supporting the bill after Edek, which initially also did so, backed down after some of its proposals were included in the foreclosure bill.
The court will have to issue its final ruling within two months after a borrower files an application, Neophytou said, adding that a citizen’s right to resort to justice is enshrined in the constitution. The initial draft of the foreclosure bill, which is part of a bundle of reforms to help banks speed up the reduction of their delinquent loans and one of the European Commission’s conditions for approving Hellenic Bank’s deal to acquire the Cyprus Cooperative Bank’s operations, gave borrowers no right to resort to the courts, raising questions over the constitutionality of the provision. The Commission asked for reforms in the legislation and the judicial procedures. Delays in Cyprus judicial system, known for dragging its feet, are to blame for lengthy foreclosure procedures resulting in increased provisions for Cypriot lenders.
The banks, currently struggling with a mountain of €22 billion in non-performing loans or 45 per cent of the total, are facing new stress tests and, depending on assumptions on how quickly they can recover terminated loans, they may be asked to find fresh capital. Concerns over the adequate capital levels of the Co-op prompted borrowers to withdraw €2bn in deposits in the first quarter of the year.
This, in turn, compelled the government to hasten the process of seeking to sell the bank’s operations, which ultimately led to the deal with Hellenic Bank which provides for the transfer of the Co-op’s healthy part, including €9.7bn in deposits, the bulk of which is insured by the taxpayer. Last week, Co-op depositors began to withdraw deposits again on fears the parliament would reject the deal with Hellenic.
Neophytou also said that foreclosure procedures will require, in addition to two valuations of an affected property, another carried out by the department of lands and surveys.
“I once again want to assure that on Sunday, the debate of all matters concerning the country’s financial stability will have been completed,” Neophytou said. “I once more express my certainty that the entirety of the bills as well as proposal to guarantee part of the asset transferred by the Co-op to Hellenic will be approved by the plenary.”
Neofytou said that there is unanimity about some of the proposed bills, convergence in the case of others and substantial political differences on other issues.
Disy, which has 18 lawmakers, and Diko, with 10 deputies, will be able to form a small majority in the 56-seat house after the supreme court cancelled the election of a Solidarity lawmaker. Akel, which is the largest opposition party, with 16 deputies is opposing foreclosures.
The Cyprus News Agency (CNA) reported that the finance committee will hold a closed session on Saturday morning to debate the amendments. The session will be completed by noon to give the groups time to decide ahead of Sunday’s plenary.
The Republic’s law office, the ministry of finance and Disy believe that the bill on foreclosures, which is the only source of controversy among political parties, provides as it stands sufficient protection for borrowers. Opposition parties, CNA added, proposed stronger formulations, which Neofytou rejected on the grounds that the bills have undergone several changes already.
“If the parties proposing changes have a majority, they will vote down the bill,” the Disy chairman was cited as saying. “If they have a majority to pass their bill, there’s no need to propose amendments. If they have a majority, they will pass the bill they propose which goes in the opposite direction of the government bills”.
Concerns expressed by Edek chairman Marinos Sizopoulos, who after meeting with Anastasiades on Thursday received assurances that specialised courts would be set up to handle such cases within months, had been addressed in an absolute manner, Neophytou continued.
Costas Melas, the chairman of the borrowers’ association was dismissive of the provision granting borrowers the right to challenge a foreclosure at the court, which he described as ‘ridiculous’.
Neophytou said that if the bills are watered down parliament will have to again debate about foreclosures in coming years.