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Banks need tools to pressurise delinquent borrowers

The banks need the means to pressurize obstinate and viable borrowers into servicing their loans; average borrowers and homebuyers should not be their primary targets, says Cyprus Finance Minister.

Cyprus Finance Minister Harris GeorgiadesTHE BANKS needs to have the necessary tools to pressure non-cooperative and viable borrowers to service their loans, Minister of Finance Harris Georgiades said on Thursday, noting however that the average borrower and house owner who faces financial problems should not be the primary target.

Cyprus received a €10 billion bailout from the EU and the IMF in March 2013 which prevented the meltdown of its financial system and covered the island’s financing needs. However the haircut of deposits over €100,000 to recapitalise the island’s largest bank, while Cyprus’ second largest lender has been wound down. One year after the bailout the main problem in the banking system is non-performing loans with the island’s lender noting that debt restructuring is a key element for the success of the adjustment programme.

Banks, as well as the international lenders say that the Cyprus insolvency framework should be reformed to assist the banks to pressure borrowers and to avert strategic defaults.

“We do indeed have to give the necessary tools to the banks to be able to move against non-cooperative or valuable borrowers,” Georgiades said, speaking in a conference organised by PWC titled “building trust, the next steps.”

He added that “it should be equally clear that an average borrower a home owner who is facing difficulties, is currently unemployed, or has seen family incomes go down should not and will not be the primary target for this enhanced capability and that will be established through insolvency framework.”

The Minister pointed out however that the problems concerning rising non-performing loans will not go away simply because we will have a new more thorough insolvency framework.

“The banks need to do their best”, he said.

Insolvency framework reform is one of the conditions included in the adjustment programme and is expected to be implemented by the year-end.

Furthermore, speaking to the conference, Demetra Kalogerou, Chairwoman of the Cyprus Securities and Exchange Commission said that lack of robust supervision impedes confidence in the markets.

“Without a robust supervision there will be no confidence,” she said, adding “we are trying to build confidence through enhanced supervision.”

Source: Cyprus News Agency

Readers' comments

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  • Karl says:

    The sooner NPLs are sorted out the sooner the economy will start picking up. However this will not happen overnight. There will be lot’s of pain and suffering along the way.

  • Richard says:

    @Janice. 100% agree – but ‘trust’ and ‘Cypriot banks’ don’t really sit well in the same sentence. They are only offering ‘amnesties’ because debt factoring agencies know full well that to offer the banks anything more than a few cents in the € would be rotten eggs.

    Until they clear the developers debt (the millionaire borrowers club) the Russians recently blew the whistle on – they haven’t got a hope of turning around NPLs and we haven’t got a hope of getting closure.

    It’s a shambles – and I am scratching my head how it can keep continuing – it’ absolutely mental.

  • janice says:

    Never mind giving more tools to corrupt bankers to cover up gross mismanagement of the loans – that have forced hapless buyers into default! The banks have annihilated the property market forcing misery and bankruptcy upon 1000s! On the contrary, we need tools not only to lock them all up, but to also force them to pay compensation, thereby restoring confidence to the market, and allow us to get our lives back. Painful foreclosures will do nothing to restore confidence, and will send potential investors a powerful message to steer well clear! The 50% NPLs are down to the banks, not innocent borrowers – many of whom would be only too happy to make reasonable and affordable repayments.

  • Pete says:

    Instead of targeting innocent home buyers, why don’t the banks target the homes and property of the people who were given the loan. And follow that up by targeting the people who GAVE them the loans.

  • Frank says:

    Headline: “Banks need tools to pressurise delinquent borrowers.”

    Suggestion: Those “tools” should include crowbars, pliers, hammers, chisels, drills and power saws.

  • Greg Gregory says:

    A title deed if a good tool.

  • M Hannah says:

    Banks, as well as the international lenders say that the Cyprus insolvency framework should be reformed to assist the banks to pressure borrowers and to avert “strategic defaults”.

    Meaning these Crooks should be arrested and put in Prison. this will HELP THEM to make their minds up to be strategic regards their Defaults.

  • andyp says:

    Trust? Why?

    Give title deeds to the rightful owners and stop holding them to ransom to pay off developers’ debt.

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