The four proposals for a law concerning the divestment process were again put before the Parliamentary Finance Committee
The four legislative proposals concerning the divestment process were again put before the Parliamentary Committee on Finance, which are expected to be brought to the Plenary on July 6.
The DISY-DIKO proposal, which concerns the provision of information to borrowers regarding the amount due, is agreed by the Ministry of Finance and the Central Bank. Accordingly, AKEL's proposal regarding the exchange of property for debt at the market price instead of the forced sale value, the Ministry of Finance indicated that it agrees with the proposal, however proposing an exception regarding the “Rent for Installment” Scheme, as it will not be able to applied, if this legislation applies.
Assuaging the concerns of AKEL MPs regarding the inclusion of an exception for a plan that has not yet been announced, the Director General of the Ministry of Finance, Giorgos Pantelis, stated that the Rent for Installment Plan has been approved by the Directorate General for Competition of the EU and its publication is expected .
On the contrary, with regard to the law proposal signed by deputies of AKEL, DIKO, DIPA, EDEK, ELAM, Ecologists and independent deputies regarding the granting of the right to borrowers to secure a decree suspending the sale process for reasons such as the finding of the amount owed, both the Ministry of Finance and the Central Bank express their disagreement, warning of risks to financial stability and state revenues.
On behalf of the Central Bank, Kleanthis Ioannidis, said that there seems to be complacency that the 9% in which the NEDs are today is low. He noted that it is very high, as the EU average is 1.8%. He warned that the ECB judges a bank as high risk if it has an NPL above 5%. He also stated that a deterioration of the institutional framework may lead to an increase in provisions, affecting also the provisions for serviced loans.
For his part, the DG of the Ministry of Finance said that the prospect of suspending the divestment process indefinitely will significantly affect the state, as the recovery of NEDs by KEDIPES and their effective management by OHS are put at risk. He added that the foreign rating agencies refer to the existence of an effective divestment framework. “If we proceed with such a proposal, Cyprus' access to the capital markets is affected,” he noted, which will become more costly for the Republic. In addition, he referred to the evaluations of the European Commission, which state that one of the biggest imbalances of the Cypriot economy is the high private debt reflected through the NED.
For his part, the Financial Commissioner, Pavlos Ioannou, said that the application of the proposed legislation is very limited, and invoked the necessity of having a structured database that also covers credit acquisition and loan management companies, in order for them to be taken into account in decision-making.
The representative of the Legal Service, Irini Neophytou, stated that with this particular proposal there is a double problem: constitutionality and procedure, as the legislative power intervenes in the judiciary and in the jurisprudence of the courts.
Furthermore, answering to deputies about the where is the bill for the special court proposed by the Government, the DG of the Ministry Finance Minister said that it was discussed twice in the Cabinet and logically there will be a conclusion at the next meeting.
The representative of the Central Bank, responding with a memorandum to questions asked by the deputies at the previous meeting of the Committee, stated that on March 31, 2023 in the banking system 36% of NPLs were over five years late, while of these 26% were over of seven years. In addition, he noted that the large majority of loans in credit acquisition companies are more than five years in arrears and the majority are terminated loans.
In response to a question from AKEL MP, Aristos Damianos, he added that the amount of Non-performing loans secured by a first home worth less than €350,000 amount to €530 million.
For his part, the Financial Commissioner stated that the information presented by the Central “is highly insufficient, if not misleading”, noting the necessity of a database, in which there is information on how many loans there is a court decision for expropriation and for how many years has she been delayed? “If we don't have enough data, we're not doing a good job,” he said, noting that the data affects guarantors, who, without liability, can't leverage their real estate because it's on Artemis.
Additionally , stated that the number of loan contracts should be known, in addition to the accounting stock, in order to compare whether or not they are being reduced, by sales or by arrangements. He noted that the confusion that exists is affecting the state's plans to address the problem.
Finally, the proposal for a law by the President of EDEK Marinos Sizopoulos on the sale price of a property at the value of the property at the time of the initial conclusion of the loan will also be put to the vote. of, stated that the disagreements of the Government with the allied parties on the issue of the management of the NEDs and the divestments were highlighted again. For such a capital issue, which according to the Government and the Central Bank, financial stability and the economy are at stake, there is no necessary agreement.
He added that the Government's proposal with the bill for the special court has been expected for weeks. “We hope the bill does not face the dilemma of disagreement with the co-governing parties,” he said, noting that DISY expects the bill to be submitted as soon as possible.
The MP of AKEL, Aristos Damianou, in his statements after the completion of the committee's meeting, said that a very strong risk assessment has developed that the banking system is at risk. Today, he noted, “this risk theory is being debunked” by the data filed by Central, as he said it confirmed our own position that the vast majority of bad first home loans are not inside the banks, but have been transferred to the buyout companies. or credit management.
“Either the Government will accept that the human and constitutionally guaranteed right of citizens, to freely resort to justice to find their right, will return to the way it was before 2018, or the Government will have to recognize that the rule of law will be affected in Republic of Cyprus, with the false argument that the banks are at risk”, he noted.
The MP of the Environmental Movement – Citizens' Cooperation, Stavros Papadouris, said that it became clear that the Ministry of Finance has two hats: the Ministry of Finance and the creditor, because “their big meaning is what will happen with KEDIPES and with OXS, which is money that will end up in the state”.
He also added that the demand of the law proposal is fair and is confirmed by a recent decision of the European court which says that despite concerns of instability of the financial sector, legislations, when they are fair, remain fair. Mr. Papadouris said, finally, that with the proposed law “we are trying to ensure access to justice”.
The MP of DIPA, Alekos Tryfonidis, reiterated DIPA's position on the need to restore the borrower's right to appeal to the court before the sale. Referring to the risks invoked by the Central Bank and the Ministry. of Finance, he said that “we have not received the appropriate answers that satisfy us and prove the risk”. combination of our own law proposal, combined with the government bill”, as, as he noted, the two do not contradict each other.
The President of EDEK, Marinos Sizopoulos, stated that the regulation of the problems that have arisen from NEDs and the protection of vulnerable borrowers – not strategic defaulters – should be done in the context of specific proposals that cover the whole spectrum. He noted that EDEK filed the proposals from 2015.
As he said, the proposals should include the special section in the District Courts for the appeal of the borrowers on the basis of specific priorities, the determination of the objective value of the mortgaged property and how this is used, the protection of the guarantors and in the case of absorption of the property, the remainder must be deleted.
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