Cyprus Mail

Palace powwow on foreclosures

The President will try and persuade the political parties on compromise changes today

By Elias Hazou

THE President will today make what may prove to be a last-ditch bid to coax the opposition into changing their minds and backing a contentious bill regulating the foreclosure of mortgaged properties.

A meeting has been called at the Presidential Palace, starting at 9.30am, that will also be attended by the ministers of finance and of the interior.

Appealing to the parties ahead of the meeting, President Nicos Anastasiades yesterday warned that possible rejection of the foreclosures bill by the House will cause dire consequences for state finances but also for the banking sector.

In a letter to the parties, immediately made public, Anastasiades argued that rejecting the bill would in fact have the opposite effect of that assumed by its detractors.

Given the additional safeguards decided recently by the government to protect vulnerable groups and primary residences, voting down the bill would “protect large debtors at the expense of small and medium borrowers and/or depositors,” the president said.

In the letter, Anastasiades recapped the extra measures designed to protect homeowners who are delinquent on their loans. They include three bills, two government-funded schemes for additional protection of primary residencies, and the insolvency framework.

The measures include abolition of bank privileges that allowed them to impose unfair terms and changing the interest rate law to scrap the banks’ right to raise rates unilaterally.

They also make it mandatory for banks to inform borrowers and guarantors about any changes to the base rate and generally of any other changes that concern it and the loan installments.

Anastasiades said these extra measures go a long way toward allaying or even altogether eradicating “warranted” concerns over the debt exposure of small borrowers and vulnerable groups.

He went on to express the hope that, during today’s meeting with party leaders, “a spirit of and desire for responsibility toward the people and the country shall prevail.”

Cyprus’ international lenders have made it clear that failure to pass the bill this month will result in non-disbursement of the next scheduled bailout tranche.
And the Central Bank governor has said the value of the mortgaged loans in the upcoming stress tests would be zero if the bill was not passed, meaning Cypriot banks would need more capital.

It’s expected that, depending on the outcome of today’s powwow at the Palace, the foreclosures legislation as well as the extra bills will be immediately forwarded to parliament. A tentative date for an extraordinary plenary session of the House to vote on the items has been set for next Thursday, August 28.

So far, all opposition parties have indicated they are against the foreclosures bill as it stands. They say its implementation will leave thousands of property owners homeless. The troika of international creditors, on the other hand, have ruled out any further tinkering with the legislation.

The administration has been battling on two fronts: getting the opposition here to waive their objections to the bill by introducing additional safeguards for primary residences; and at the same time trying to get the troika of lenders to give the nod to these extra measures. Without the troika’s prior assent, any other discussion is futile.

Finance minister Harris Georgiades has been in communication with troika officials, by phone and teleconference, all along.

“Obviously the plan is to clear up matters with the troika by tonight (Thursday), and we hope we can get that,” government sources said.

“The parallel negotiations with the troika people are not easy, but we’re making some headway,” they added.

It’s understood that the international lenders have not outright vetoed the extra measures complementing the foreclosures bill.

The toughest issue is a measure recently announced by the government, where banks may be criminally liable for non-compliance with banking operations regulations.

This has to be cleared first with the European Commission and the European Central Bank, as EU law has criminal procedures relating to banks that are different from Cyprus law, sources said.

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