MPs on Friday decided to go ahead with a vote to stop homes and businesses from being repossessed, despite pleas by incoming Central Bank Governor Chrystalla Georghadji to back down.
Speaking during yesterday’s emergency meeting of the House Legal Affairs Committee, Georghadji warned that the proposed legislation could have severe risks for banks and borrowers.
Including a negative impact on bank assets, increased house mortgage rates, more restrictions and conditions on granting loans and thus ensure a bigger need for capital by the banks.
She expressed concern about a potential negative impact on the value of guarantees on bank loans, noting that national priority is that systemic banks, notably Bank of Cyprus, Hellenic and the Co-operative Central Bank, pass the Asset Quality Review (AQR) and the stress test which are expected to be completed in the next three months.
Calling on a long relationship of trust with parliament from her position as Auditor General, Georghadji asked the House to scrap the vote and promised to promote a comprehensive draft bill on insolvency as soon as possible.
She also submitted an email from a European Commission official to Finance Minister Harris Georgiades where it was stressed that the Troika does not agree with mass home repossessions, but that this does not mean that they agree with the committee’s legislative initiative.
The soon to be Central Bank chief added that the law will also influence foreign investors who want a clear picture before they invest in Cypriot banks, while she raised the question of why the banks accept homes as loan guarantees if they do not intend to repossess.
“Do not do it now. The timing is off,” Georghadji told MPs, adding that “we are neither callous nor uninterested in society.”
But her pleas fell on deaf ears as MPs decided to put the bill to vote on April 10.
According to one of the bill rapporteurs Edek MP Nicos Nicolaides, three amendments will be submitted on Monday to further specify the conditions for suspending overdue payments in order to ease Georghadji’s concerns.
Committee chairman Soteris Sampson said that the decision to put the bill to vote was unanimous and that the proposal gives borrowers the right to pursue postponement of their payments in court after all other options have been exhausted.
He also said that the committee listened carefully to the new governor and that she has the committee’s complete trust and consideration.