HAVING had the big dangers posed to the banking sector and the economy by the foreclosures bills clearly explained to them by the finance minister and the governor of the Central bank at Monday’s finance committee meeting, the opposition parties still refused to back down. The plenum subsequently rejected the presidential veto of the bill stipulating the freezing of foreclosures until October while it put off the vote on the veto of a second bill amending the foreclosures law for the end of the week.
It is astonishing they are persisting with the bills after the very clear briefing by governor Constantinos Herodotou, whom they could not accuse of political expediency. Herodotou represents the ECB and his warnings are, by definition, endorsed by it, so what were the parties playing at? Had they perhaps realised their mistake and were now looking for a face-saving solution or did they think the governor was joking when he told them the European Single Supervisory Mechanism (SSM) expected a negative impact on bank provisions if the bill came into force?
Were deputies not aware that increased provisions, which the SSM considered inevitable if the bills were implemented, would automatically lead to the need for more capital, both for the banks and the state, which owns Kedipes with all the bad loans of co-op bank? Where would this extra capital come from? If it is not raised, which is very likely given that no investor would put money in a system which is designed to help people not repay their loans, we would be looking at another meltdown of the economy.
The proportion of NPLs is currently 32 percent while the EU average is 3.5 per cent. Cyprus has by far the worst record of reducing bad loans in the EU, and has been warned on countless occasions that the high number of NPLs poses a big threat to our economy. So what do the political parties want to do? Make it even more difficult for the banks to reduce the bad debts that threaten their future? The level of irresponsibility beggars belief.
Meanwhile as a face-saving solution for their irresponsibility, deputies at the committee made another idiotic proposal – the financial ombudsman should be given the authority to examine every re-structured loan, which apart from being practically unfeasible as it would cause huge delays is highly irregular. This is the responsibility of the Central Bank, as representative of the ECB, and cannot be given to an individual official as another delaying tactic.
There should be no compromise by the president on any of this as it is impossible to reason with parties guided by populist irrationality. He should veto whatever foreclosures bills are approved by the parties and refer them to the supreme court. End of story.