Borrowers association says foreclosures are not necessary

Syprodat said that borrowers are willing to renegotiate their loans but are finding it difficult

The Association for the Protection of Borrowers (Syprodat) this week said that the key to reducing non-performing loans in Cyprus is through sustainable, viable restructurings, not foreclosures.

Commenting on the latest report by the European Commission on Cyprus, the association described it as positive, as it upgrades the Cypriot economy.

In addition, the association noted that the commission’s report acknowledged that Cypriot banks have sufficient capitalisation and ample liquidity, and that their profitability is beginning to recover.

However, Syprodat noted that the report also highlighted that despite a significant reduction in non-performing loans, Cyprus still has one of the highest NPL ratios among EU member states.

The association also stated that the European Commission acknowledged that “vulnerable points” still exist in relation to NPLs and the framework of foreclosures, which the report identified as “the key to encourage” borrowers to restructure their loans, address strategic defaulters, further reduce NPL stocks, and improve payment discipline in Cyprus.

Moreover, in its announcement, the association reiterated its disagreement with the narrative that “foreclosures help the economy”, pointing out that “the opposite is true”.

Specifically for Cyprus, the association stated that there is no payment indiscipline but rather a temporary difficulty for borrowers to meet their loan instalments due to the high cost of goods, services, and energy, combined with the successive increase in interest rates.

It further stated that the commission’s report overlooked the events of 2013, “whose consequences continue to affect a significant number of borrowers to this day”.

In addition, Syprodat stressed the fact that the risk of poverty among the population in Cyprus exceeds 17 per cent.

Furthermore, the association said that there are no strategic defaulters, one of the key arguments that has been previously put forward in support of foreclosures.

“Let them finally explain, in specific terms, who these individuals are and how they strategically act to avoid repaying their loans,” Syprodat said.

“We refuse to believe that their comments actually refer to the people who now use their reduced incomes at this moment in time to meet their own and their families’ daily needs,” the announcement stated.

It also made note of the “major responsibility of banks” for Cyprus finding itself in this situation, citing the “irresponsible lending practices over many years”.

What is more, the association stressed that “borrowers are willing to undergo restructuring agreements, but banks and investment funds, using the threat of foreclosure as a weapon, are refusing to remove excessive burdens”.

“The key to reducing NPLs is sustainable restructuring, as defined by the Central Bank of Cyprus’ relevant directive and code,” Syprodat said.

“If banks and investment funds seriously engage in restructuring, foreclosures will not be necessary,” the association concluded, stating that, in turn, “non-performing loans will decrease significantly and rapidly, benefiting the Cypriot economy”.