Cyprus Mail

Optimism for nod to fifth insolvency bill

By Elias Hazou

THE government is optimistic that the troika of lenders will in the next few days give the nod to the fifth and last bill of the insolvency framework, finance minister Harris Georgiades told MPs on Monday.

The bill in question regulates which mortgaged primary homes are exempted, under certain conditions, from repossession, as well as the thorny issue of guarantors to bad loans.

“Progress has been made in terms of the consultations and clarifications requested [by the troika], which we have given to them,” Georgiades said.

This was the outcome of intensive talks held over the past 10 days with the team of troika technocrats and experts on the island.

Once the troika green-lights this item of legislation and it is forwarded to parliament, then “it shall be considered that in forwarding the bill [to parliament] we are meeting the relevant obligation stemming from the bailout agreement,” said Georgiades.

Grilled by lawmakers, the minister said the delay in tabling the bill was due to the troika’s objections to some of the provisions as drafted by the government.

He confirmed that the points of contention revolve around the value of the primary residences to be spared from repossession proceedings, as well as the matter of guarantors to loans in the red.

Four of the five bills comprising the insolvency framework – a set of laws governing personal and corporate bankruptcy – have already been forwarded to government.

On Monday a joint session of the House finance and interior committees began reviewing the four bills, article by article.

Speaking to reporters after the minister’s briefing, DIKO MP Angelos Votsis said so far parliamentarians have concluded examination of the bill regulating the profession of insolvency practitioners, a 2014 bill amending corporate law, and a bill introducing examinership proceedings for viable businesses.

What remains to be discussed is another bill (2015) amending corporate law, which modernises current legislation and speeds up the process of liquidating companies, as well as a bill amending current personal bankruptcy laws.

“We hope to soon have before us the fifth government bill, so that we can make the most out of February [forwarding the framework to the plenum] in order to avoid any unpleasant developments,” Votsis said.

Cyprus’ international lenders had reportedly red-flagged a provision in the government bill linking guarantors’ obligations to those of the borrower, meaning they should be let off the hook if the borrower has declared bankruptcy.

Last week the troika people proposed loan restructuring where the secured loan amount will burden the principal debtor, the rest being the responsibility of the guarantors.

On the issue of primary residences, in addition to the criteria set for viable borrowers to be eligible for a court order imposing a repayment plan to the bank – thus precluding foreclosure – the troika technocrats demand that before a borrower’s primary residence can be protected by the court, the borrower’s other assets must be liquidated.

The delay in bringing the whole bankruptcy package to parliament has indirectly impacted Cyprus’ adjustment programme.

That’s because opposition parties have vowed to continue blocking enforcement of foreclosures-related legislation – passed last year – until the insolvency framework is enacted. The troika has said that impediments to implementing updated repossessions legislation means Cyprus is not in compliance with its bailout programme, and has suspended a full review of the programme.

According to the government, this loose end has damaged the credibility of the economy, effectively barring Cyprus from borrowing from international markets.

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