Cyprus Mail
Cyprus

DIKO unveils proposal to tackle NPLs

By Angelos Anastasiou

DIKO leader Nicolas Papadopoulos on Thursday unveiled a three-pronged proposal to address the issue of non-performing loans, comprising a legislative amendment to afford borrowers the right to bid for their loan before it is sold at a discount to a third-party investment fund, the creation of a ‘bad bank’ to manage a part of the banks’ portfolio of distressed loans, and revisiting the March 2013 Eurogroup decisions.

Flanked by his deputies Marcos Kyprianou and Fytos Constantinou, DIKO’s leader built on the premise that non-performing loans in Cyprus are out of control — around 50 per cent of loan portfolio — and the government has no plan to remedy the situation.

“We fully disagree with the government’s approach of focusing on achieving fiscal targets and ignoring the real economy and improving the people’s position,” he said.

“The responsibility for this situation lies not with borrowers, […] but with those who led the economy to unbearable losses, the ‘haircut’, and the loss of €8 billion from the economy of Cyprus through the haircut of Greek debt.”

According to DIKO’s proposal, distressed borrowers and their guarantors should be afforded the right to bid for their loan at a discounted price, before it can be offered to third-party investment funds by the lender.

“No bank should be allowed to sell a loan to a third party unless it has first allowed the borrower and the guarantors to buy it at a better price than that offered by the third party,” he explained, before issuing an ultimatum to the government.

“Unless this proposal is accepted, we will vote against the bill for the sale of loans [by banks].”

Asked how a distressed borrower that has proven unable to repay the loan in the first place could afford to buy it back, even at a discount, Papadopoulos offered slashing part of the loan.

“What we are suggesting is this: instead of [a bank] offering to sell a loan to an investment fund at a 50-per cent discount, asking the borrower – or the guarantor – whether they are willing to to buy the loan at an equal, or even lower, discount,” he said.

The second element of the proposal was the creation of an asset-management company, funded in part with government money, to take over a “critical mass” of non-performing loans from banks so that they some of the pressure of immediate foreclosures can be alleviated.

“We are merely proposing that Cyprus does what Ireland and Spain have done, and Italy is about to do,” Papadopoulos said.

“At last, the government, the Central Bank, and the European Central Bank, need to explain why this model is good for these countries, but not for us.”

The final bit of the proposal was the most radical – challenging the March 2013 Eurogroup decisions so that the seized deposits and holdings of financial products are returned to their former owners.

“Cypriot depositors were ‘haircut’ so that Greek depositors wouldn’t be,” Papadopoulos said.

“Supporting Greece was the right thing to do, and we are not asking Greece for money. We are asking for the same solidarity we showed others. We are not asking for the money of the German, or the French, or the Portuguese people – we are asking for our own money back.”

But when a reporter pointed out that trying to overturn the decisions would be more a waste of time than a realistic prospect, Papadopoulos resorted to an argument familiar from his thesis on the Cyprus problem negotiation strategy.

“What is certain is that if we don’t ask for it, no one will give us back a single cent,” he said.

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