The Association of International Banks (AIB) is urging Cyprus politicians to pass a controversial bill that aims to regulate foreclosures and help local banks recover assets and lower risky loans, saying that the island’s economy is “following a path of gradual recovery from the crisis.”
Part of Cyprus’ obligations towards the Troika of international lenders that imposed a EUR 10 bln bailout plan to rescue the economy, but which backfired by causing a banking sector meltdown in 2013, was to pass a package of measures that would regulate foreclosures and insolvencies and help reduce the rate of non-performing loans (NPLs), presently estimated at 50% of the banking system’s loanbook.
But a conflict between the government, that says growth will only come out of implementing the bailout terms, and the populist opposition parties that have taken their cue from the left-wing Syriza party in Greece, has delayed the passage of th foreclosures legislation.
MPs claim that the government is delaying concluding the parallel regulations on insolvencies and has not introduced any safeguards to ensure primary homes are not possessed, while the administration says this is all talk, as the package of bills cannot be implemented on their own.
Representing 25 foreign banks from nine countries with total assets of EUR 14 bln, the AIB said in a statement that after reforms in the banking sector and the recapitalisation of Cypriot banks, “the people of Cyprus have endured (the crisis) and are overcoming with sacrifices, dignity and an admirable hard working spirit.”
“This is precisely why these positive developments should not in any way be jeopardised by delays in the foreclosures legislation. The depositors of major Cypriot banks have had to face a bail-in and we are confident that the lawmakers of Cyprus will ensure that this will never happen again and shall therefore enable the banks facing issues with NPLs to deal effectively with the problem.”
Adding their voices to the appeals made by the local banks, the association of foreign-owned banks said that “the adequate and balanced foreclosure legislation is one of the cornerstones to ensure that Cypriot banks are never again in need of assistance, which now, according to the new European ESM procedures, includes a potential partial participation of the depositors in the rescue of banks.”
By voting on the balanced foreclosure legislation the lawmakers are not protecting the interests of banks but those of their depositors and of the Cyprus economy at large, the AIB announcement concluded.
