Filenews 30 June 2022 - by Theano Thiopoulou
Again in the foreground is the establishment of a special court for non-performing loans, as there is the government's will to reinstate the relevant bill, which, however, will not contain provisions that will facilitate defaulters, preventing the smooth processing of the restructuring of the loan, nor provisions that will exacerbate the congestion of cases before the courts.
At the meeting held yesterday at the Ministry of Finance, following a meeting under the President of the Republic Nicos Anastasiades on accuracy, the Minister of Finance Konstantinos Petrides presented to party leaders and representatives the comprehensive and holistic framework for the management of non-performing loans, which provides the tools, both for the further reduction and resolution of the problem of non-performing loans, as well as the safety net of the primary residence of vulnerable households.
The 19-page document presented by the Minister refers to the overall planning promoted by the government since 2015 for the protection of the primary residence of vulnerable households, which concerns 4 pillars: Estia Plan (completed on June 15, 2020), Home plan (acceptance of applications until June 30, 2022), a plan of the Central Body for Equal Burden Sharing (the acceptance of applications was completed on September 30, 2021) and a rent-for-instalment plan (Mortgage to Rent), which will cover specific categories of the population, including the non-viable ones of the Estia Scheme, with a total cost of €400 million (the design is under construction). The fiscal cost of government plans to manage/address non-performing loans to protect the primary residence is estimated at around €0.5 billion.
According to the data presented, Cyprus maintains the highest percentages of NPLs in Europe (11% of loans), after Greece (European average 3%) and 47% of NPLs in Cyprus have arrears of more than 5 years (corresponding European percentage: 17%). From the end of 2014 until February 2022, according to the Ministry's document, there was a decrease in NPLs in the banking sector from 56% to 11% (of which about 53% concern households), a decrease in absolute numbers of €26 billion (from €29 billion to €3 billion), €7 billion during the years 2014 - 2017, through the repayment and restructuring of NPLs, €19 billion. in the years 2018-2022 through portfolio sales to acquisition companies (€18 billion contractual amount).
The reasons why the bill was withdrawn
The document notes that in April 2021 it was decided to withdraw the bill that provided for the establishment of a court for non-performing, after taking into account a series of amendments by the political parties, in the absence of the competent ministries and the Central Bank, outside the philosophy of the government bill, which endangered financial stability. Regarding the challenges in the Central's proposal, for the new appeal procedure in the context of foreclosures, it is stated in the document that all disputes between borrowers and creditors concerning the confirmation of the debt are being brought to be resolved through the judicial process, which already presents serious delays and inefficiency. Increased moral hazard is created - the culture of repayment of borrowers is negatively affected, the existing foreclosure framework is destabilized, given the inability of the courts to hear such cases (debt confirmation). It leads to an increase in the provisions and losses of the former CCB loans that have been transferred to Hellenic Bank and fall under the Asset Protection Scheme, with a consequent significant increase in Hellenic Bank's compensation claims from KEDIPES. The recovery of debts of the FSF, whose entire portfolio falls within the perimeter, is negatively affected.
