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Cyprus in urgent review of repos bill, as Troika talks near end

21 July, 2014

An emergency meeting has been called at the Ministry of Finance where Haris Georghiades is discussing last-minute changes to the repossessions bill, which is being demanded by the Troika of international lenders in order to help relieve banks from non-performing loans (NPLs) and for the fifth review of the bailout agreement to be concluded.
Georghiades summoned Interior Minister Socratis Hasikos and Attorney General Costas Clerides to the Finance Ministry for a final review of the draft bill that is expected to be tabled for a vote to the House of Representatives.
Passage of the bill will also pave the way for the Troika to release the next tranche of its bailout for Cyprus, of the total 10 bln when one bank was shut down and all its troubles passed on to another as part of the March 2013 deposits-for-equity “bail in” of savers’ money.
The bill on foreclosures and private auctions of mortgaged properties is expected to be finalised on Monday with the Troika mission who are expected to have their final meetings with local stakeholders on Tuesday and conclude their review of Cyprus’ economic adjustment programme by Friday, July 25
Discussions between the authorities and Cyprus’ lenders are focusing on striking the right balance between the rights of the borrower and the lenders. No meeting between the Troika heads and Finance Minister Georgiades has been set so far, but the Cyrpus News Agency reported that a meeting may be scheduled later on Monday to discuss the final details of the bill.
According to the same sources, the sticky issue of the discussions is the right of the borrower to dispute the auction and contest the price of the mortgaged property.
The text should be finalised by Tuesday at the latest, as the bill should be submitted to the Council of Ministers on Wednesday for approval and then submitted to the House of Representatives, while time should be given to the Law Office of the Republic for legal vetting.
The issue of foreclosures is believed to be the most important subject of the current review as the new framework providing for foreclosures and private auctions should have been implemented by June.
Based on the Memoradum of Understanding agreed with the Troika, primary residences are exempt from foreclosures until the entry into force of the legal framework governing corporate and personal insolvency procedure in the coming December.
The meeting between the Finance Minister, Central Bank Governor Chrystalla Georghadji and the Troika heads of Mission over the agreement on the fifth updated MOU is scheduled for Thursday, marking the conclusion of the fifth review.
The Troika officials are pressing for expediting foreclosures as they believe that this would encourage borrowers to repay their loans or agree to restructure their loans. Debt restructuring is a key element of the Cypriot bailout programme, as NPLs (loans in arrears over 90 days) in the banking sector have reached €27 bln, or about 45% of all loan books in the commercial and Cooperative banking sectors.
Meanwhile, the team of Troika officials continued their meetings with stakeholders on Monday discussing reforms in the civil service, facilitating development, and loans to small and medium-sized enterprises (SMEs).
Troika technocrats were expected to discuss action plans at the Directorate General for European Programmes, Coordination and Development, regarding the World Bank reports, in the context of reforms in the civil service, and will also separately examine reports for the Ministries of Health, Agriculture, Education and the Interior.
A team of Troika technocrats will be visiting the Ministry of Labour, to discuss issues of social welfare, help for planning, and the development of an IT system.
Another team will be visiting the Presidential Palace to discuss the strategy for development with a special group from the Presidency, to facilitate development.
Furthermore, at the Central Bank, a Troika team will examine the Cyprus Finance Organisation, with an aim to facilitate lending to small and medium enterprises.
On Friday, the Finance Minister told the House Finance Committee that there was disagreement between the government and the Troika over the foreclosure legislation on mortgaged properties.
Speaking after a meeting with the Troika mission heads at the Parliament, Committee Chairman and DIKO leader Nicholas Papadopoulos said that Cyprus’ international lenders insist on legislation allowing for the foreclosure and private auctions of property reaching Parliament the soonest.
“The Finance Minister told us that so far there is no agreement on the foreclosure legislation,” he said, but added that “this does not mean that there is no chance for an agreement to be reached in the coming days”.
However, he admitted that passing this legislation through the House would be a precondition for the disbursement of the sixth bailout tranche.
According to Papadopoulos, the Troika officials said that “there are positive developments and the implementation of the Memorandum is progressing well”.
However, speaking on behalf of his DIKO party, he noted the high percentage of NPLs, the lack of liquidity in the banking sector, as well as the high unemployment rate.
“We must find ways to deal with the high percentage of NPLs,” he said, pointing out that the implementation of the part of the Memorandum concerning the banking sector is not progressing well.
The problems will not be solved through foreclosures, he noted.