Both the Ministry of Finance, the Central Bank and the Association of Banks warned of a series of risks for the economy
Both the Treasury, the Central Bank and the Association of Bankers have warned of a series of risks to the economy and the banking system if proposed legislation is implemented that would allow borrowers to secure a court order setting aside the foreclosure process to examine issues such as the existence of abusive charges.
Speaking before the committee which discussed a series of proposals for a law on the framework of divestments, Mr. Pantelis said that “the proposal in question creates great risks for the economy and we believe that it should not proceed, as the proposed amendments are broad and provide the possibility of obstructing the process through the Courts and concerns all non-performing loans (both inside and outside the banking system) amounting to around €25 billion”.
As he mentioned, a possible relaxation of the framework for the divestments will create “huge problems”, including disbursements from the Recovery Plan, since in the first disbursement there were also commitments related to the management of the NED.
Mr. Pantelis pointed out that the credit rating of the Republic of Cyprus is marginally above the investment grade with regard to three rating agencies, while Moody's maintains the Cypriot debt in the junk category, unlike the other EU member states, the rating of which is much higher. “That means we can't afford to play around with the divestment framework,” and any proposed law promoting its relaxation “will significantly affect our rating with the potential downgrade that that entails,” he said.
In his reports, Mr. Pantelis also noted that while efforts are being made to reform the justice delivery system to make it more efficient, any decision by the Parliament that will lead thousands of borrowers to the Courts “will create another burden by blocking all cases”.
At the same time, Mr. Pantelis agreed with the proposal of a law co-signed by DISY and DIKO that the letters for divestitures include an analysis of the balance of the debt, adding that the Ministry of Finance considers that this provision should also be extended in the case of credit acquisition companies. With regard to AKEL's proposal which provides that in the event of an exchange of property for debt, the price of the market value of the property should be chosen, instead of the forced sale price, Mr. Pantelis said that the Ministry of Finance agrees on the understanding that this provision does not conflict with constitutional provisions.
Finally, he characterized the proposal submitted by the President of EDEK to carry out a sale at the valuation price when the loan was concluded as unorthodox, stressing that this proposal can work to the detriment of the borrower.
On behalf of the CBC, the head of the Crisis Directorate, Kleanthis Ioannidis, agreed with the proposal of DISY and DIKO, saying that transparency is enhanced, while he also agreed with AKEL's proposal for the exchange price of the property for debt, assuming that there is no constitutional obstacle . With reference to the proposal that gives the borrower the right to appeal to the court, Mr. Ioannidis submitted the Central Bank's disagreement, noting that “in our opinion, such a thing will bring about a significant risk with a possible downgrading of the evaluation of Cyprus, a burden on the public administration debt and reduction of lending”.
Separation of bank and company divestments and credit redemptions
For his part, the Financial Commissioner, Pavlos Ioannou, cited his office's data on sales suspension cases, saying that the success rate of 43% of the complaints he examines, with a total of 160 cases, involve credit acquisition companies, which, he said, proves that there is a question of the legality of the foreclosures.
Saying that the expected benefit to a borrower from an appeal to the Court is limited, as long as the obligation is not eliminated, Mr. Ioannou said that “the whole framework can be more effective with minor adjustments to the framework.”
“We must separate the sale process from the banks and the process from the credit acquisition companies, which do not have supervisory capital. Therefore, stricter provisions should be made for those companies, and given that the largest percentage of sales come from SOEs,” he said, while pointing out that there are companies that refuse to include eligible borrowers in the Hestia plan because they are not obliged to.
We are not real estate companies
The Director at the Association of Banks, Michalis Kronidis, agreed with the proposal to provide information on the amount due, asking for a transitional period in order to prepare the relevant system, while he disagreed with the proposal law to exchange the property for debt at market value, as well as to offer to sell at the appraised price at the time of the agreement.
“Banks are not real estate companies and neither do they want to be,” he added.< /p>
He also opposed the change in the divestment framework, recalling that Cyprus received warnings from the European institutions and the International Monetary Fund. He pointed out that in addition to the risk of downgrading the creditworthiness of the state, there is also a risk of downgrading the rating of credit institutions.
And the Association of Credit Management Companies only agreed to the proposal to provide information on the amount owed.
The special court
The bill for the creation of a special court to examine financial disputes of borrowers will be submitted to the Council of Ministers next Thursday for its approval and submission to Parliament, the Director General of the Ministry of Finance Giorgos Pantelis said before the parliamentary Finance Committee.
Speaking before the committee that discussed a series of proposals for a law on the framework of expropriations, Mr. Pantelis said that the legal technical review of the bill for the creation of a Court of Special Jurisdiction has been completed and will be submitted to the Council of Ministers next Thursday with the aim of submitting it to the Parliament on the same day. He also said that they have been sent to the General Directorate of Competition of the Commission for the rent-for-installment plan “and I believe that we are in the final stages to send the approval of the plan and then some amending bills will be promoted for the implementation of the plan”.
The president of the committee, Christiana Erotokritou, stated in her statements after the session that the discussion of the matter will continue as information was requested from all the competent bodies, to emphasize however that the bill to establish a court of special jurisdiction for bad loans.
This bill, he said, “may negate the necessity of some of these proposals, as we believe many of these concerns are reflected in this bill.”
“We believe that, as has been announced, the government bill regarding the fast adjudication of financial disputes of mortgage borrowers with a primary residence up to a certain value is in the right direction, meaning that this will be done over a period of a few months and not a few years,” he said.
Relaxing the framework will create “enormous problems”
Declarations by MPs
In statements after the session, DISY Member of Parliament, Savia Orfanidou said that as a matter of principle, issues concerning financial stability should be dealt with by bills and not by legislative proposals and she pointed out the disagreements of the Ministry of Finance, the CBC and the Banks Association on the possibility of changing the context for the sales.
He finally said that the DISY is waiting for the filing of the bill for the special court in order to be positioned.
In his own statements, AKEL MP Andreas Kavkalias said that the government does not have the political will “to block a voracious system that cannibalizes the basic human rights of citizens” and added that “what is required for us is the restoration of a balance which would make the context of sales less unfair to the detriment of borrowers, a development that will work positively in our opinion and in the process of restructurings that everyone admits, even the CBC, that the code for restructurings is not respected”.< /p>
EDEK Member of Parliament, Ilias Myrianthous, described the expected filing of the bill as a positive development, adding that it can be discussed at the same time as the proposed law that gives the borrower the right to appeal to the Court.
DIPA Member of Parliament Alekos Tryfonidis said that the proposal for a law that would give the borrower the right to appeal to the Court before the expropriation already gathered an increased majority, and is consistent and perfectly combined with the government's position on the creation of special courts.
< p>“It is finally time for the banks and credit acquisition companies to realize that the climate is not favorable for them and they must stop taking risks,” he concluded.
For his part, the Movement MP Environmentalist, Stavros Papadouris said that the proposed law does not change the context of expropriations, but “we are filtering for whom the expropriation process will proceed”. eight years, it is not about the set-aside decree problem which will take a month. “If the state wants to go ahead with the special courts,” he said.
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