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MPs freeze foreclosures despite warnings (update)

Despite MPs being warned that changing the foreclosures legislation would have negative repercussions on the banks and the economy, MPs have voted to change and suspend the legislation.

MPs freeze foreclosures despite warnings PARLIAMENT on Friday voted to temporarily suspend foreclosures on properties that could be eligible for inclusion in a state borrower relief scheme but also changed the foreclosures legislation despite warnings that it would have negative repercussions on banks and the economy.

Earlier, MPs rejected a proposal to postpone the vote on the two bills.

The objective of the proposal, which passed with the votes of opposition parties, was the temporary postponement of foreclosure procedures relating to primary residences, which could be eligible for the Estia debt relief scheme that starts in September.

Opposition MPs argued that the suspension was necessary due to the uncertainty as to which borrowers would be eligible.

The opposition also approved changes to the foreclosures legislation that will make it harder for banks to collect their dues, possibly causing problems to the wider economy.

The law on foreclosures was amended in the summer of 2018 to make it more effective, some four years after it was passed by parliament with changes that essentially rendered it ineffective and unable to help banks reduce non-performing loans.

Up until then, the IMF, the European Commission and the European Central Bank (ECB), the troika of international creditors which supervised Cyprus’ 2013 bailout, had been calling for an amendment to the law to make it more effective.

Ignoring the warnings, opposition MPS amended provisions and, in essence weakening the banks’ ability to collect their dues at a time when supervisors are piling on the pressure for a reduction in bad debts.

Banking sources had suggested the amendments would essentially afford protection to strategic defaulters and possibly increase their numbers since foreclosure procedures would slow down or be weakened.

They fear that fresh capital would be needed since there will be changes in the valuation of collateral, as well as possible bank downgrades by ratings agencies.

Ruling Disy chief Averof Neophytou said his party would vote against the proposals because they were going to lead the economy and the financial system into fresh adventures.

House finance committee chairman, Diko MP Angelos Votsis, who had submitted the proposal on behalf of his party, initially supported postponement of the vote to give time for improvements to be made to the foreclosures legislation.

But he later said that they would support the proposals because there was mistrust towards the banks and courts must also take into account the central bank’s restructuring code. According to Votsis, courts so far have chosen to make decisions taking into consideration bank solvency.

Diko chairman Nicolas Papadopoulos said he had supported not putting the proposals to the vote since discussion at the House finance committee had not finished. However, since they went to plenum, he supported his proposal.

Update 19 July 2019

Yesterday, President Nicos Anastasiades vetoed the bills passed by the opposition saying that the changes would impact “the values of the collateral, straining bank balance sheets and leading to demands from supervisors for additional provisions and fresh capital.”

Parliament must convene within 15 days to decide whether to accept or reject the veto. Rejection would mean the issue ending up before the Supreme Court, which will have the final say.

Readers' comments

Comments on this article are no longer being accepted.

  • Eileen Sandford says:

    Here we go again. I seem to remember that the last time we ignored the advice of the IMF.,the European Com. and the European Central Bank: most of the population lost a lot of their personal, hard earned savings.

  • Costas Apacket says:

    Danger! Self-interested Elite parasitic idiots at work.

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

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