Financial ombudsman Pavlos Ioannou complained to MPs on Monday that the lack of staff at the agency is negatively affecting its output.
Ioannou said the office is unable to cope with increasing workload, and warned that the agency was on the verge of ‘collapse’.
The operation and budget of the financial ombudsman was discussed at the House finance committee.
The agency was set up as an independent service tasked with settling disputes between financial institutions and their customers – a daunting undertaking given the astronomical number of non-performing loans (NPLs) in post-March 2013 Cyprus.
The office is designed to serve as an independent authority to be engaged once all internal restructuring efforts made privately between the banks and borrowers have been exhausted, in order to help broker a settlement without resorting to the courts.
But MPs heard that the work of the agency is often hindered by its own board of directors, which for example has not hired new staff despite the fact seven new positions had been approved by parliament.
In addition, the board of directors can block the agency’s budget.
Speaking to the media later, Greens MPs George Perdikis referred to “a paradox” whereby the agency’s board of directors comprises representatives of banks, insurance companies and representatives of the Cyprus Securities and Exchange Commission.
Because of understaffing the office is experiencing serious delays in processing the complaints submitted to it.
According to Perdikis, the situation is such that even the foreign ministry has notified the financial ombudsman of complaints made by foreign nationals via their embassies in Cyprus.
He said parliament would take the ombudsman’s into account and work on legislation amending the structure and operation of the agency.