An opposition party said Monday it will table a bill that would make decisions taken by the financial ombudsman legally binding on banks.
Angelos Votsis, of the Democratic Forces Cooperation, said they would be submitting their legislative proposal within the week.
Making the official’s decisions binding would force the banks to be “more flexible” with borrowers, he noted.
The House finance committee were reviewing the 2021 budget for the office of the financial ombudsman
The financial ombudsman is an independent service tasked with settling disputes between financial institutions and their customers – a daunting undertaking given the astronomical number of non-performing loans in post-March 2013 Cyprus.
The office was designed to serve as an independent authority to be engaged when all internal restructuring efforts made privately between the banks and borrowers are exhausted, in order to help broker a settlement without resorting to the courts.
Speaking in parliament, financial ombudsman Pavlos Ioannou revealed he has reached an ‘understanding’ with two banks, who have agreed to follow his decisions under certain circumstances.
He said also that he has come to an arrangement with one bank where, if a certain set of circumstances obtains – such as someone at risk of losing their primary residence with a value of up to €350,000 – the lender will suspend foreclosure proceedings, provided there is ‘reasonable scope’ for reaching a loan restructuring solution with the debtor within a period of six months.
Committee chair Christiana Erotokritou said later that “we have heard with satisfaction that systemic banks tend to follow the ombudsman’s decisions, but we also learned that his decisions are not accepted by other organisations like Altamira.”
Altamira is an asset management company.
Erotokritou said that under the difficult economic conditions of the coronavirus pandemic, parliament and the state have a duty to shield good-faith borrowers while penalising strategic defaulters.
But the Diko MP lambasted the government for not beefing up the ombudsman’s budget; not only that, the ombudsman’s office will now have to pay rent for the premises on which it operates – the building that has housed the Grains Commission, which is set to be abolished.
Disy deputy Onoufrios Koulla said that since its inception the financial ombudsman has examined some 5,000 complaints against banks, in many cases finding in favour of borrowers and guarantors.
In one single decision concerning the now-defunct cooperative bank, he said, relief was given to around 11,000 borrowers who had been overcharged.
In other business, main opposition Akel announced it will table a bill spelling out who can benefit from lower VAT on primary residences.
The lower VAT rate – 5 per cent – is afforded to young couples looking to build their first home. However, it has since emerged that the lower rate loophole was taken advantage of by foreign nationals who acquired Cypriot nationality via the citizenship-by-investment scheme – translating into millions in tax revenue lost to the state.
Akel’s bill will spell out the maximum price of real estate per square metre that would be eligible for the lower VAT. It aims to eliminate the possibility of luxury homes becoming eligible for the 5 per cent rate.