This had been one of the final outstanding prior actions as set out in the memorandum with the Troika of international lenders, following the delayed approval by the House of the framework for insolvencies and foreclosures.

The bill ensures that the rights of the borrowers and mortgage holders of non-performing loans, presently accounting for more than 50% of the banking system’s loanbook, will be transferred to the new investors.

The bill, drafted by the Central bank of Cyprus and approved by the Legal Services, was submitted by Finance Minister Haris Georghiades who hopes deputies will study it immediately and approve a final version by the end of September.

Loans of up to €1 mln representing about 96% of all loans in Cyprus will be able to be sold to portfolio investors that must be Cyprus or EU-registered and approved financial entities.

This way, banks will be able to rid themselves of distressed loans and avoid creating a ‘bad bank’ to undertake or guarantee this responsibility. Banks have already started calling in long-overdue loans, some of which are not serviceable as the collateral is worth far less than the loan itself.

On the other hand, borrowers were reluctant to surrender assets, which had sent the bank’s NPLs to soaring levels, forcing them to constant revise their provisions upwards.

Source: Financial Mirror