Cyprus & World News

Central Bank of Cyprus gives clarifications on management of arrears

03 December, 2013

A Central Bank of Cyprus (CBC) directive to credit institutions issued last September on the management of arrears aimed, inter alia, to achieve a fair restructuring of loans to viable borrowers (individuals and businesses) experiencing financial difficulties and who cannot meet their contractual obligations.

The CBC clarified on Tuesday that “under this directive banks are required to examine and evaluate each case individually and propose solutions, preferably long-term ones, which correspond to the specific needs and economic circumstances of each borrower”.

According to this directive, such solutions may include, for example, a reduction in the interest rate, a grace period, lengthening of the repayment period, consolidating various loans into one, even partial debt forgiveness, the CBC added, explaining that “the latter option can be applied within a broader framework of settlement, if all other solutions of restructuring are judged as unsustainable and provided that the borrower agreed to repay a reduced amount of the balance of the loan within an early and specified time period”.

Furthermore, “the restructuring solution with partial debt forgiveness should be used with caution and in very exceptional circumstances in relation to borrowers who cooperate fully and honestly with their bank and provide all information and documents when requested” the CBC said.