By Angelos Anastasiou
THE row between borrowers’ associations and commercial banks rages on, rekindled by a wave of warning letters sent to borrowers who have fallen behind in repayments.
Speaking on state radio yesterday morning, the head of the Banks’ association Yiorgos Georgiou tried to defend the recent wave of letters sent out en masse as being the first step prescribed in the Central Bank of Cyprus’ (CBC) directive on arrears management, issued to all commercial banks last September.
“With regard to non-performing loans [NPLs], we have the CBC’s directive on arrears management, which includes a structured timeline of handling payments in arrears,” he argued.
“The first step in dealing with such issues is establishing contact with the borrower, and the context of this contact is also specified. The customer must be informed in detail of the loan in question, the delays, and also a clear notice that the customer may lose any property offered as loan collateral.”
But the point was challenged by the head of the Association for the Protection of the Primary Residence Stavros Papadouris, who claimed the letters are far from simply informative.
“These letters have been written with malicious intent,” he charged. “They have not been written to invite borrowers to a dialogue but to trick them into waiving the rights granted to them by the [CBC’s] Code of Conduct. This is a sneaky and malicious effort, in bad faith.”
Papadouris was referring to another CBC directive, issued last December, setting out guidelines on how banks and borrowers should negotiate the restructuring of troubled loans.
His argument was rejected by Georgiou, who once again pointed to the CBC’s instructions.
“In the past, banks may not have sent such letters, but the practice is now a supervisory obligation,” he said. “Customers should not take offence at the letter. What is being asked of them is to visit their bank and be open about their financial situation so that an honest effort to restructure their loan can be made.”
Georgiou acknowledged that loan restructuring is a relatively new concept in Cyprus, and argued that setting up the required infrastructure to facilitate them will take time.
“We need to learn how to carry out restructurings,” he said. “The [CBC’s] directive is quite complex and the banks are trying to respond to its provisions properly. We are trying to train our colleagues in restructuring loans, but it also requires the cooperation of borrowers and guarantors. There will certainly be complaints as some will not be fully satisfied, but the vast majority should be offered with appropriate solutions.”
But to borrowers’ reps, this was little consolation, as they claimed that delays in responding to restructuring requests add to borrowers’ burdens due to accrued interest.
“Does Mr Georgiou believe that each borrower should pay for the banks’ delays?” protested Kostas Melas, head of the borrowers’ association. “The CBC’s directive has been available to them for a whole year.”
Papadouris was equally critical, offering a similar argument.
“[Georgiou] forgets that for all these months, since September 2013, restructuring requests have gone unanswered and customers have been unfairly charged interest owing to the banks’ negligence,” he said. “We have been made aware of several cases where borrowers have requested restructuring months ago but have yet to receive a response.”
Georgiou insisted that borrowers need to be patient and actively participate in the restructuring process by approaching the bank openly and honestly.
“I am not aware of the pricing policy of each bank, but I am aware of the huge efforts being made to accommodate all borrowers,” he said. “Restructuring a loan is no easy task – the customer must come to the table and present his or her financial situation in good faith, and be prepared to produce any required evidence or documentation. This sort of negotiation could take months to yield results.”