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Association of Banks: Continuous extensions to sales send wrong messages

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Association of Banks: Continuous extensions to sales send wrong messages

Further extensions in the suspension of sales do not benefit the borrowers affected by the Covid pandemic but the strategic defaulters, while at the same time sending the wrong messages, says the Cyprus Banking Association.

According to KYPE, the Association has prepared a new note with its positions in view of the discussion in the Finance Committee of the Parliament for the introduction of a new suspension of sales of main residence and small business until the end of October, due to the effects of the coronavirus pandemic.

However, the Association opposes that the existing auctions, but also those that are planned, concern mortgage debts that became overdue several years before the start of the pandemic and for which there are court decisions. The vast majority of these auctions, he says, concern fields, plots, commercial properties, holiday properties and properties that due to deterioration and poor condition are unsuitable for home ownership and need demolition.

“Therefore, any further extension of the suspension period is unnecessary and sends the wrong messages,” the Association notes.

In its note, the Association of Banks recalls that the European supervisory authorities (European Central Bank, European Banking Authority and the Single Supervisory Mechanism) have maintained in a very strict tone that the continuous amendments to the legislation, and in particular to the increases the credit risk with very significant consequences for IPs. These warnings, he emphasizes, are not made through public announcements but in the context of the control and risk assessment process.

According to the Association of Banks, the determination of capital needs, including Pillar II, and the necessary provisions for NPLs is largely based on assumptions about the value of collateral.

“Consequently, the uncertainty regarding the stability of the Cypriot legal framework and the continuous modification / extension / suspension of collateralization procedures and schedules lead to an increase in funds and additional provisions,” he said.

At the same time, it is reported that MES in the Cypriot banking system decreased by € 3.9 billion with the MES index falling to 17.7% or € 5.2 billion at the end of 2020, a decrease resulting from the sale of loan portfolios, write-offs and restructuring loans. However, the stock of MES consists of terminated accounts, ie no restructuring or trading process is underway, and that 45% of them are overdue for more than 5 years.

“The above fact”, the Association emphasizes, “clearly demonstrates that any perpetuation and further extension of the suspension of sales does not benefit the borrowers who may have been affected by the economic effects of the pandemic, but instead the strategic defaulters who consciously choose do not serve their obligations for several years “.

In addition, the Association points out that the protection of the first home is already offered by the Home Plan, and concerns those borrowers (natural or legal persons) who have chosen to submit a completed application in time and have been judged as eligible and viable. At the same time, for the cases that submitted a completed application for participation in the Plan and were deemed eligible but unsustainable, the Ministry of Finance plans the implementation of a new plan through which the possibility of maintaining the main residence will be offered and at the same time the sale process will be suspended.

He notes that for these cases the Ministry of Labor, Welfare and Social Insurance has not sent a letter of rejection to the applicants until the processes are completed and the new plan is implemented.

“Consequently, any legal or other proceedings have been suspended and the specific applicants (eligible but unsustainable) do not face any risk of selling their main residence,” the Association emphasizes.

Finally, the Association points out that the continuous amendment of the legislation and the suspension of sales does not solve any problem but simply postpones it and postpones any solution to a later stage, which “has significant effects on the economy and the financial sector.”

“Priority is the sustainable restructuring of MES if there is an intention to cooperate and especially the possibility of repayment”, the note states, which emphasizes that the possibility of repayment is of utmost importance since if there is no possibility of repayment any restructuring will prove unsustainable in the long run .

Source: politis.com.cy

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