Cyprus banks are reportedly still concerned over new delays in foreclosure procedures despite the new changes voted in that were supposed to eradicate government concerns.
On Friday, legislators passed a compromise proposal after the government vetoed previous amendments, but bankers say the law still leaves the door open for borrowers to take lengthy legal action to prevent a repossession of their mortgaged property.
Banking sources believe that delays will be lengthened with serious implications on balance sheets, as banks expect these delays will affect negotiations for packaging and selling off NPLs with institutions.
Banks feel that continuous changes to the foreclosure law have only harmed them as they affect the value of collateral property.
Reportedly, Hellenic Bank is in negotiations with Pimco for the sale of a loan package worth EUR 1.5 bln, while BoC is negotiating a new deal with the Apollo Fund.
Changes in the foreclosure law have also taken a toll on the banks’ market capitalisation as Bank of Cyprus and Hellenic Bank saw their stock drop by 8.55% and 3.5% respectively since the changes voted in on 12 July.
New amendments approved last Friday have also reportedly displeased international monetary institutions as Cyprus banks may see their capital needs increase as they will have to raise provisions.
The ECB will evaluate how the new law is to affect the value of mortgaged property.
The European Single Supervisory Mechanism is also waiting for updates on what Cyprus legislators have voted in, while Finance Minister Harris Georgiades appeared critical towards MPs saying that the country had an obligation to go over any possible changes with the supervisory mechanism.
The Cyprus Central Bank has said that, in cooperation with ECB, they are to prepare a proposal foreseeing the creation of a mechanism which is to replace the law voted in last week.
Meanwhile, Georgiades said that the final shape of the foreclosure law voted in by legislators is to be evaluated by the Attorney General who is to determine whether the law complies with the constitution.
Georgiades also criticised MPS arguing that they acted in a “sloppy manner, as they took the final decision on Thursday and voted the law in on Friday”.
Talking to CyBC radio, Georgiades reiterated that parliament did not comply with obligations towards the ECB.
"Legislators were compelled to obtain the opinion of the ECB, because being an EU Member State, while offering significant benefits and advantages, also generates obligations which in this case have not been respected".
He added that "the legislation is not without problems. There are both procedural and substantive problems. Decisions being made on these sensitive and serious banking issues should not be taken in such a hasty manner.”
The minister said that the issue is now of a legal nature, rather than political.
He argued that one of the clauses introduced foreseeing the intervention of the Financial Ombudsman is unnecessary and may add more workload, delaying cases even further.
Georgiades noted that the Financial Ombudsman had had the right to intervene in cases where banks and borrowers have disagreements.
He also said borrowers had the option of legal action, noting than thousands of cases are already at court.
President Anastasiades is not expected to refer the new amended law, as he did with amendments voted in on 12 July, as the government does not wish to prolong the state of uncertainty in the banking system.
