Parliament accepts presidential objection to foreclosures bill

Cypriot opposition dominated parliament on Friday accepted presidential objection to a bill amending the foreclosures legislation which would have a potentially negative impact on the banks and more widely the economy which is still faced with legacies of the 2013 bailout.

After a debate which lasted several hours, 10 opposition deputies sided with the 17 ruling DISY party lawmakers to uphold objections voiced by President Nicos Anastasiades to an opposition proposal amending existing foreclosure legislation in a way that would have made it more difficult for banks to foreclose on mortgage-secured non-performing loans.

The president had pointed out that should the legislation was amended just a year after having been passed by parliament, it would probably force the banks to make additional provisions for non-performing loans and would expose Cyprus as a volatile and unstable investment destination.

Cypriot banks are still in a shaky position after their resolution in 2013 as they are burdened with a still high percentage ratio of non-performing loans.

Latest Central Bank data on Thursday said that non-performing loans stood at 10.14 billion euros at the end of March, 2019, representing 30.6 percent of total loans.

Cyprus Central Bank, the European Central Bank, EU’s Single Supervisory Mechanism and the Cypriot finance minister had urged Cypriot deputies against weakening the foreclosures legislation as it would seriously impact the banks.

In a move aimed at winning support by opposition deputies, Central Bank chief Constantinos Herodotou met with the chief officers of all banks, censuring them for dragging their feet in implementing the Central Bank’s Code of Conduct on restructuring loans owned by economically weak borrowers.

In exchange for support on the foreclosures legislation, DISY deputies sided with center DIKO party in passing an amendment proposed by DIKO, aimed at giving more leverage to loan owners against banks cases they foreclose on loans secured by the primary residence of loan owners.

They passed with a 26 to 23 majority the DIKO amendment, which offers loan owners a recourse to the Financial Ombudsman, who can decide whether the banks had followed the Central Bank rules in restructuring their loans.

If the Ombudsman establishes violation of the rules the borrowers will have the right to apply for a court injunction halting the foreclosure procedure.

Finance Minister Harris Georgiades said the amendment makes the existing legislation “problematic”, and complained that parliament did not accept his suggestion to postpone voting for a few months to give him time to present a comprehensive proposal on dealing with non-performing loans.