Cyprus lawmakers scrapped amendments to the foreclosure legislation after being referred back to parliament by President Nicos Anastasiades, while MPs passed a new law to protect distressed borrowers.
The new law passed with 26 DISY and DIKO votes and 23 against.
New legislation allows the Financial Ombudsman to be called in to rule over cases where borrowers claim that banks are not following directives issued by the Central Bank.
According to House Finance Committee chairman Angelos Votsis, their proposal provides borrowers three tools if they believe that banks are behaving badly.
Firstly, through the insolvency law procedure, a divestment can be suspended. Secondly borrowers who are eligible to apply to be included in the state-backed ESTIA scheme can request a court order for the suspension of the repossession of their primary residence.
And thirdly they can request a ruling from the Financial Ombudsman on whether banks are complying with the Central Bank code.
President Anastasiades had referred the freeze back to the parliament the original law change stating that participation in the ESTIA scheme is voluntary.
Anastasiades referred the amendments to the foreclosure law arguing that a mortgage is part of the agreement between lender and borrower and the changes took away the right of foreclosure.
He added that the changes would see banks in need of capital increases and endanger the economy’s recovery.
The plenary session was preceded by meetings of the relevant parliamentary committees.
Addressing MPs prior to the House plenary, Finance Minister Harris Georgiades made it clear that his ministry insisted parliament should accept the President’s veto and scrap the amendments passed on 12 July.
Following the vote, Georgiades told CyBC radio that the legislation was an improvement compared to the previous one “but is not without issues”.
In his first reaction to the new legislation, the minister said that while the proposal limited the problems, it did not solve them.
In addition, he called on the Central Bank of Cyprus to come up with a new, more comprehensive proposal this autumn.
Georgiades said: “We should allow the ESTIA scheme to work before proceeding with any changes in the divestments law”, while stressing that banks balance sheets must be relieved from non-performing loans.
