Cyprus Mail

President vetoes ‘negative’ foreclosures changes (update)

President Nicos Anastasiades on Friday vetoed bills passed by the opposition rendering the foreclosures legislation ineffective and raising the risk of downgrades for the island’s banks and the economy.

In a letter to parliament, the president said the changes made by opposition parties on July 12, the last session before the summer break, rendered the foreclosures framework ineffective.

Parliament will convene on July 29 to discuss the veto.

The changes would impact “the values of the collateral, straining bank balance sheets and leading to demands from supervisors for additional provisions and fresh capital,” the president said.

Though widely expected since the approval of the bills last week, the presidential veto came a day after Moody’s rating agency warned the amendments were credit negative for Cypriot banks because they hampered their efforts to reduce their high stock of bad debts leading to increased provisions.

In its report, Moody’s said the July 12 decisions by parliament made it difficult for banks to reduce non-performing exposures, which were about 30 per cent of gross loans at the end of last year, and also make inorganic sales of NPEs less attractive to investors.

“A failure to reduce NPEs will increase provisioning needs for the banks,” Moody’s said. “The amendments will likely make it more challenging for banks to foreclose on collateral held against defaulted borrowers.”

In his letter, Anastasiades said the amendments approved by the opposition could also force banks to raise borrowing rates and limit new lending, which in turn would have a negative impact on the economy.

They were also a disincentive in attracting investors and also increased the risk of downgrades for the banks and the country.

Cyprus had spent six years in junk territory, once again entering investment grade in September 2018 and being able to borrow from international markets at low rates.

The amendments passed almost a year after improvements to the foreclosure framework were adopted in response to International Monetary Fund and European Union pressure that facilitated banks’ efforts to foreclose and which have started to produce results.

They allow the defaulted borrower to obtain a court decision that stalls a foreclosure process if it is proved that a bank has not taken all necessary actions required by the central bank directive to restructure a nonperforming loan.

At the same time, the amendments clearly state the reasons a defaulted borrower can cite to challenge the auction of the property.

Amendments also include, among others, extending to 45 days from 30 days the payment due date following a notice and the auction of a property following a notice; and preventing the sale of a property at below 80 per cent of its market value for six months, from three months previously, while maintaining a floor of 50 per cent of the market value for any potential sale.

Related Posts

Two injured by swords in Paphos commotion

Iole Damaskinos

Police arrest man for stealing tractor

Staff Reporter

Two hunters fined in Paphos

Staff Reporter

Seasonal travel demand stronger than expected

Kyriacos Nicolaou

New arrest for a case of child pornography

Staff Reporter

Euro zone likely heading into mild recession

Reuters News Service