Finance Minister Harris Georgiades warned Monday Cyprus may have to face consequences over the parliament’s decision to amend the law on foreclosures, effectively slowing down processes and making it difficult for banks to collect their dues.
Opposition parties on Friday changed the foreclosures legislation despite warnings it would have negative repercussions on banks and the economy.
They also voted to temporarily suspend foreclosures on properties that could be eligible for inclusion in a state borrower relief scheme.
Georgiades, who urged President Nicos Anastasiades to veto the bills, said Monday that foreclosure procedures would take years if the bills were signed into law.
Speaking on state radio, the minister said MPs must realise Cyprus did not operate in a vacuum, cut off from the rest of the world.
“If we insist on thinking that we can have our own rules in Cyprus, I fear there might be consequences,” he said.
Georgiades said Cyprus was now part of the European banking union and banks were supervised by the European Central Bank with the same rules and demands.
“We haven’t realised this,” he said.
The law on foreclosures was amended in the summer of 2018 to make it more effective, some four years after it was passed by parliament with changes that essentially rendered it ineffective and unable to help banks reduce non-performing loans.
Up until then, the IMF, the European Commission and the European Central Bank (ECB), the troika of international creditors which supervised Cyprus’ 2013 bailout, had been calling for an amendment to the law to make it more effective.
Georgiades said in all modern countries, from the moment a borrower stops paying, it takes just a few months to foreclose.
In Cyprus, procedures took between seven and 12 years, rendering the framework ineffective.
“With all the changes made the other day, it would take years. The decisions not only annul the 2018 decisions,” the minister said, adding that certain changes were so bad that procedures may be slower than before 2015.
Banks suggested the amendments would essentially afford protection to strategic defaulters and possibly increase their numbers since foreclosure procedures would slow down or be weakened.
They fear that fresh capital would be needed because there will be changes in the valuation of collateral, as well as possible bank downgrades by rating agencies.