Cyprus Mail

Insolvency bill ‘unlikely’ to be passed in House next week

DIKO's Nicolas Papadopoulos

By Angelos Anastasiou

IT IS unlikely that the fifth and final bill completing the insolvency framework – a set of laws offering protection to distressed borrowers – will be forwarded to the House plenum by March 19, when the suspension of tougher foreclosure legislation expires, House Finance committee chairman Nicolas Papadopoulos said on Wednesday.

Committee-level discussion of the fifth bill, which relates to the insolvency of natural persons, started in the morning in a joint session by the Finance and Interior committees.

In addition to opposition parties AKEL, EDEK, and the Greens, who stated that they will oppose the bill in its current form, various professional groups also voiced concerns, while discussion will resume in an extraordinary joint committee session next Tuesday.

The government’s failure to introduce the insolvency framework has been commonly cited by opposition parties for voting to suspend implementation of foreclosure legislation, which derailed Cyprus’ economic adjustment programme – a set of reform measures agreed to with international creditors in 2013, in exchange for a €10bn emergency bailout loan for the cash-strapped island – and halted release of the next tranche of funding.

But, Papadopoulos said, the committees are examining the prospect of submitting the first four bills of the framework to the plenum while concluding discussion of the fifth.

“I believe it is very difficult to complete evaluating the fifth bill by Thursday, which was the milestone set for passing the insolvency framework, and we will see how we tackle the practical issue,” he said.

Last week, in a meeting with European Central Bank boss Mario Draghi, President Nicos Anastasiades had pledged that Cyprus will complete its next programme review – on hold due to non-implementation of the foreclosure law – by mid-April.

In addition to freezing the release of the next tranches of bailout money, further delay in implementing foreclosure legislation will keep Cyprus ineligible to participate in the ECB’s quantitative easing programme, launched this week. According to the terms set by the ECB, countries under a programme are eligible as long as they maintain positive progress reviews.

Deputies from AKEL, EDEK, and the Greens said the fifth insolvency bill is unacceptable in its current form.

Additionally, various stakeholders who attended the joint committee session expressed serious reservations about several clauses.

The Cyprus Bar Association expressed doubts as to the bill’s helpfulness for borrowers.

Financial Ombudsman Pavlos Ioannou said he was sceptical about the lack of a clause mandating that a borrower’s eligibility for a personal restructuring plan rests on condition of having exhausted all possible restructuring efforts – a point conceded by the Finance ministry’s Andreas Charalambous.

Ioannou added that the bill’s mechanism for wiping out the debts of insolvent borrowers up to €15,000 is too time-consuming and will incur administrative costs in excess of the amount written off.

The argument against cumbersome bureaucracy was echoed by Association of Certified Accountants’ chairman Kyriacos Iordanous.

Most objections were voiced by the Banks Association’s Demetra Valianti, who argued against a clause settling disagreements between borrowers and banks over collateralised property valuation by referring the dispute to the Commerce ministry’s Insolvency Service, which would make a final decision.

She described the clause calling for the equal treatment of all guarantors “problematic” as it would be employed by every guarantor, when under current legislation banks may go after any guarantor they want.

Valianti argued against the debt write-off clause, especially as regards the provision for releasing guarantors of any obligations.

“Why should guarantors be released when debt is written off?” she said. “If guarantees are meaningless, you can’t lend.”

She added that the blanket clause means that rich guarantors will also be released.

The Borrowers’ Association noted the need to focus on restructuring loans by banks before a borrower declines to insolvency.

“Action should be guided by the Central Bank of Cyprus code of conduct for arrears management, in order to effect proper and just restructuring,” the association’s chairman said.

“Doing that will render insolvency redundant,” he added.

Related Posts

Analysis: Corruption Perceptions Index

Dr Charles Ellinas

Cyprus Business Now

Kyriacos Nicolaou

Cypriot mountaineering team conquers Mount Aconcagua

Jonathan Shkurko

Minister proposes health cards for student athletes

Jonathan Shkurko

Candidates make final appeal to voters

Antigoni Pitta

Briton who killed wife ‘was in no state to give statement’

Andria Kades


Comments are closed.