Cyprus Mail

Binding resolution sought for insolvency

By Elias Hazou

The Cabinet will this week likely ask parliament to issue a binding resolution stating that an insolvency framework will be passed and take effect as of January 1.

The resolution will be binding on both the government and the legislature, sources said.

Opposition parties want, in writing, additional and concurrent safeguards for homeowners who have trouble servicing their mortgage, otherwise threatening to vote down the government’s foreclosures bill.

That ‘safety net’ is an updated insolvency law, which the government has pledged to bring but says will take weeks or months to hammer out due to its complexity.

Meantime however the foreclosures bill must be enacted before the next meeting of euro area finance ministers, in September, as per the demands of Cyprus’ international lenders.

The stakes are high: failure to pass the bill within that deadline will put at risk the disbursement of the next bailout tranche for the state, but could also wreak havoc on banks’ books, the value of their property-tied assets (loans) discounted as EU-wide bank stress tests loom in October.

The foreclosures legislation is designed to help banks deleverage by loosening the shackles on collecting non-performing loans, which currently account for almost 50 per cent of private debt.

The bill does exempt so-called primary residences from its clauses until January 1. Now, the President’s thinking is that the House should additionally pass a resolution committing both the government and the legislature to an insolvency law, taking effect also of January 1. An unconventional move, but one that may prove face-saving for both camps.

Sources said also that the contentious foreclosures bill will perhaps go to the plenum next Thursday (August 28).

But that depends on the parties’ reaction to the additional legislation beefing up the foreclosures bill which the Cabinet is set to announce this Wednesday or Friday.

A bill regulating banks’ unfair terms in consumer contracts will likely form part of these additional measures. Currently, financial institutions in Cyprus are exempt from unfair terms clauses – an exemption to EU directives gained by Cyprus when it was negotiating its accession to the bloc.

And the Cabinet will likely unveil another bill regulating late payment fees and charges by banks.

Also in the pipeline is a previously announced scheme where the state will buy houses from the banks that are up for seizure. Another programme will see the state subsidise interest on mortgage payments for primary residences; this will apply only to loan installments and property values under a certain value.

Lastly, there could be a bill regulating the profession of insolvency councillors, whose tasks concern debt restructuring of natural persons to ensure repayment of creditors and preserve, where possible, primary homes.

Any repossession procedures will be briefly suspended giving the councillor time to present a restructuring plan, which could be binding if several criteria are met.

It’s understood that the troika has given the nod to these complementary legislative items.

The President’s announcement of such safeguards on Monday seems to have somewhat softened up resistance to the foreclosures bill.

Main opposition AKEL – who up until now was outright opposed – said in a statement on Tuesday that it would wait for the government’s additional measures in writing.

“We never rejected dialogue with the government,” the statement said, but added that at first glance that the safeguards appeared to be cosmetic as they would not prevent banks from engaging in mass forced sales of properties.

Likewise, EDEK said that they did not want to be “a priori negative,” provided that the additions mulled by the government bring about substantive safeguards to homeowners.

DIKO, whose support the government desperately seeks in the House, has also toned down its anti-bill rhetoric over the past week, going almost completely quiet – indicating that the administration is making some headway.

Related Posts

North claims that most of its illegal drugs coming from the south

Gina Agapiou

Wide divisions as clock ticks on local government reform

Elias Hazou

Fog forces suspension of Nicosia derby

George Psyllides

Motorists urged to be cautious due to fog

Staff Reporter

Coronavirus: No deaths, 586 new infections reported on Monday (updated)

George Psyllides

Nearly 25,000 court cases delayed for over two years

George Psyllides


Comments are closed.