The bill, submitted by the finance ministry, would also allow authorised credit institutions (ACIs) to complete unfinished properties.

The provisions are required in order to harmonise with EU directives.

Under the Business of Credit Institutions Laws, banks are required to dispose of repossessed property within three years.

In addition, international accounting standards mandate that a bank demonstrate that it can sell repo properties within 12 months.

Some have expressed concerns that swiftly disposing of the many repossessed properties may set back the property price in the short run.

But speaking at the committee session, a Central Bank official poured cold water on the notion of extending beyond three years – to perhaps five years – the period for which banks can keep repo properties on their books.

To date, banks could request an extension on the three-year period from the Central Bank of Cyprus (CBC). Almost all such requests have been granted, a CBC official informed MPs.

But the rules have changed, as from now on such requests must also be sanctioned by the European Stability Mechanism.

Under the new legal framework a bank can auction a property at a reserve price of 80% of the current market price. If there is no interest, the bank can place the property to a new auction with the same price while in a year’s time it can auction the property with a new reserve price amounting to 50% of the current market value.

Source: Cyprus Mail