Cyprus’ banks have reluctantly agreed to extend the freeze on main residence foreclosures up to 350,000 euros, but tensions have arisen over proposed legislative changes. In a heated debate, credit buying firms holding nonperforming loans of €22 billion vehemently opposed the financial commissioner’s expanded powers and a law incorporating the Central Bank’s mechanism for bad loans.
While banks, dealing with nonperforming loans of €2 billion, support the commissioner’s bill with modifications, they reject the Central Bank’s proposed mechanism. The Ministry of Finance has joined the fray, urging focus on the commissioner’s bill.
As the debate intensified in Parliament, credit companies argued the legislation is impractical, while banks advocated for maintaining the current foreclosure framework. Strategic default concerns persist, creating a complex legislative landscape.
The association of credit purchase companies contends that the proposed legislation makes the foreclosure framework ineffective and time-consuming, negatively impacting collateral values. They stress the bills infringe on constitutionally guaranteed rights and compliance obligations, and highlight that constant talk of changing the law benefits strategic defaulters, provoking those who remain consistent with their obligations.
The association emphasizes its commitment to supporting the government’s plan by intending to join the Rent-For-Installment Plan but criticizes the impracticality and ineffectiveness of the proposed bill and law. Their main concern about the financial commissioner’s bill regards the inclusion of both professional housing and terminated loans, affecting creditors’ rights. Regarding the law proposal on the mechanism, credit buying companies stress it limits creditors’ rights.
On the other hand, the association of banks supports the commissioner’s bill but stresses the importance of ensuring a dispute resolution body meets its obligations promptly. They express concern about the Central Bank mechanism, fearing it will render the foreclosure process ineffective, make debt recovery difficult, and favor strategic defaulters.
The banks argue that the existing legal framework for foreclosures is satisfactory, suggesting the proposed changes will have a negative impact on the stability of the financial system and the credit rating of the Cypriot economy.