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Cyprus Central Bank circular on loan restructuring

The Central Bank of Cyprus has issued a circular to the commercial banks following much criticism about their practices for restructuring the loans of those having difficulty in maintaining repayments.

central bank of cyprus COMMERCIAL banks should establish the proper procedures to adjust the market value of mortgages on the basis of the negative divergences of the Residential Property Price Index, Central Bank of Cyprus said in a circular.

The new circular [Greek] comes in the wake of renewed criticism to banks over their practices for loan restructuring for troubled borrowers.

Debt restructuring is considered a key element for the stabilization of the island`s banking sector that came close to collapse in March last year when the government agreed on €10 billion financial assistance with the European Commission, the European Central Bank and the IMF.

“The credit institutions should regularly monitor real estate values, at least on annual basis regarding commercial properties, on a three-year basis when it comes to residences and more frequently when market conditions are subject to significant fluctuations,” the CBC said.

The CBC calls on credit institutions to apply a “fair and viable pricing policy regarding loan restructuring which aims at minimizing cost, levies and loyalties, other expenses and interest rates for borrowers subject to loan restructuring.”

“In order to work out proper and viable restructuring solutions, the credit institutions should carry out a thorough analysis of collateral,” the circular said.

It added that a loan facility could be considered as covered by collateral only when the value of collateral equals the market value of the mortgage on the basis of its initial independent valuation that has been reduced accordingly.

If immovable property has been pledged as collateral, the credit institutions should carry out an independent professional evaluation to calculate the market value and the forced sale value of the collateral, in case the collateral constitutes an alternative source of debt repayment or the credit institutions require borrowers to examine the possibility to provide other assets as additional collateral

– Cyprus News Agency

Readers' comments

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  • Sheri Bowditch says:

    The banks are not helping us real people! Full stop!

    Negative equity, no Title Deeds, impossible loans, NO HELP or cooperation. Most us us bought in good faith, being told that Cyprus laws followed British. Alarm bells rang when I discovered that lawyers do not oversee “completion”. Things have gone from bad to very much worse since then!

  • Adrian says:

    If the banks had shown due diligence in their business practices in the first place the collapse would not have happened!

    Instead of being happy that the collateral covered the loan they should have checked on ability to pay and checked that the loan was paid instead of letting the interest build up.

    So Mr Banks don’t come complaining, you caused the problem you caused everybody’s negative equity. Go after the people that you negotiated the loan with and leave the people who have legitimately bought property but due to widespread incompetence have been unable to obtain the title deeds to their property.

    If a bank loaned a garage money to buy stock and then was unable to pay would they go and seize all the cars that the dealer sold?

  • hani chehaibeer says:

    Bank Of Cyprus should start reducing its rates on loans from the 9% they are charging now to 4-5% max and should stop unfair banking practices like charging interest on bank charges! if they want things to get better.

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.


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