By Angelos Anastasiou
FINANCE ministry officials remained in lengthy talks with the troika of international lenders on Monday over some of the controversial provisions that would allow banks to foreclose insolvent borrowers’ properties.
State broadcaster CyBC reported late last night that the Cypriot side had settled on a draft foreclosures bill, including a clause allowing the borrower to appeal the foreclosure process in court. From the report it was assumed that the troika – opposed to this provision – had yielded on the point.
However, negotiations are ongoing at a technocratic level with the focus being on striking the appropriate balance between the rights of borrowers and lenders.
A meeting between the finance minister and the troika – European Central Bank, European Commission and International Monetary Fund – to reach agreement has yet to be scheduled, but Finance Minister Harris Georgiades and Interior Minister Socratis Hasikos, along with Attorney General Costas Clerides, met at the finance ministry on Monday in order to discuss the contested provisions.
“The issue has reached its high point,” Hasikos said entering the meeting, implying imminent decisions.
“The government will act humanely, but on the other hand we have to respect the lender’s right to receive what he is owed,” he added. “We will try to get over this in the most painless way possible.”
As the bill has acquired ‘prior action’ status – meaning it needs to have been passed before the next tranche of international aid to Cyprus can be released – the government had planned for it to be ready for Legal Services to review and submit to the Council of Ministers by Wednesday. The bill would then be forwarded to parliamentary parties for review, ahead of voting at an extraordinary House plenary session before September’s Eurogroup that would decide on approving the next aid tranche. This planning required the bill to have been finalised by Tuesday, but deadlines are nearing and agreement on the final text has yet to be reached.
The Cyprus News Agency reported on Monday that the bone of contention was a clause allowing the borrower to appeal the foreclosure process in court, a provision which the troika had argued would make the process more time-consuming. The government also insists on borrowers being allowed an active role in determining the value of their property collateral – also not acceptable to the Troika.
Initial scheduling had Georgiades and Central Bank governor Chrystalla Georghadji meeting with the troika mission heads on Thursday, in order to finalise the fifth update of the Memorandum of Understanding (MoU) between Cyprus and the Troika.
The MoU’s fourth update called for a bill allowing the foreclosure of property used as collateral while exempting primary residences until the new legal framework on insolvency is passed by year-end.
Foreclosures in Cyprus followed a highly complex process involving government bureaucracy and court orders that could be postponed almost indefinitely, before a property could be auctioned off by the government’s land registry. It has been reported that foreclosures take 12 years to conclude on average, allowing borrowers to default on their loan payment without immediate foreclosure concerns, and frustrating lenders who found themselves unable to collect or apply pressure to borrowers.
The new foreclosure framework seeks to combat such distortions by removing the land registry from the proceedings, and allowing banks to carry out court-ordered foreclosures themselves.