Cyprus Mail 19 July 2019 - article by George Psyllides
President Nicos Anastasiades on Friday vetoed bills passed by the opposition rendering the foreclosures legislation ineffective and raising the risk of downgrades for the island’s banks and the economy.
In a letter to parliament, the president said the changes made by opposition parties on July 12, the last session before the summer break, rendered the foreclosures framework ineffective.
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,” the president said.
Though widely expected since the approval of the bills last week, the presidential veto came a day after Moody’s rating agency warned the amendments were credit negative for Cypriot banks because they hampered their efforts to reduce their high stock of bad debts leading to increased provisions.
In its report, Moody’s said the July 12 decisions by parliament made it difficult for banks to reduce non-performing exposures, which were about 30 per cent of gross loans at the end of last year, and also make inorganic sales of NPEs less attractive to investors.
“A failure to reduce NPEs will increase provisioning needs for the banks,” Moody’s said. “The amendments will likely make it more challenging for banks to foreclose on collateral held against defaulted borrowers.”
Parliament must convene within 15 days to decide whether to accept the veto or reject it. Rejection would mean the issue ending up before the supreme court, which will have the final say.
