articles | 14 January 2015

12% of NPLs restructured

Slightly more than one in ten non-performing loans (NPLs) were restructured by September 30, 2014, the House Institutions Committee heard recently from the Central Bank of Cyprus (CBC).

According to the CBC’s records, €3.4 billion worth of NPLs were restructured up to September, out of a total €27.6 billion – or 12.36%.

Of the total restructured loans, €1.279 billion were taken by individuals and €1.864 billion were business loans.

But despite the stats furnished, deputies expressed their frustration at what they perceive as a deliberate failure to produce consolidated data by the CBC and commercial banks.

The committee decided that discussion of the issue of loan restructurings will conclude in next week’s session, and that failure to produce the requested information will be reflected in the committee’s report.

During Tuesday’s session, the committee continued discussion on revised appraisals of property values for the purposes of restructuring loans, as well as the issue of personal guarantees. Speaking after the committee session, acting chairman Demetris Syllouris said the issue of revising property appraisals is crucial as it is directly related to the broader approach on foreclosures and the risk of sharp reductions in property prices.

Syllouris said the issue of whether personal guarantors on non-performing loans should be released when a borrower’s property collateral is foreclosed is a matter being seriously considered by the committee, arguing that the initial valuation of the property – on the basis of which the loan was made – was the sole responsibility of the lender and no fluctuation can be allowed to burden the borrower.

“If the Finance Minister and the government want to have some positive developments on the issue of the insolvency framework or any of the other matters involving the Troika, these issues need to be resolved immediately, otherwise there can be no talk of a balanced approach and our behaviour will reflect that,” warned Syllouris.

Responding to whether the CBC governor and the Finance Minister are expected to submit the requested data, Syllouris said that since the issue has been discussed exhaustively by the committee, which has made its request for data known, the committee has decided to conclude discussion next week, pointing out that for instances where insufficient data has been furnished, its report will apportion blame.

DISY deputy Andreas Kyprianou said the issue of personal guarantees on collateralised loans, as well as that of current property values, touch on both the insolvency framework and the banks’ capability of restructuring non-performing loans.

“There was a common practice in Cyprus of guarantors who often signed because of friendship, relation, or collegiality,” Kyprianou said. “All these guarantors now find themselves liable with their personal properties.”

AKEL deputy Aristos Damianou said the operation of the banking system and CBC oversight remains worrisome. He added that of €3.6 billion of restructured loans, almost €2 billion relate to big businesses, with fewer restructurings of small business and individuals’ loans, a fact he deemed particularly alarming, as “the banks obviously have different priorities”.

“We know very well what groups these relate to,” the AKEL deputy said.

Damianou also said that some €80 million were written off by banks as part of restructured loans, wondering who these relate to. “They certainly don’t relate to the man next door,” he quipped.

Source: Cyprus Mail

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