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Cyprus’ Troika of international lenders – comprising the European Commission, European Central Bank and International Monetary Fund – yesterday tabled a new proposal on the fifth bill of the insolvency framework.

According to local media sources, the lenders proposed that in case of insolvency, a borrower will be discharged of his secured debt, while the relevant guarantor will be liable to repay the remaining unsecured debt.

For instance, in case of a debt amounting to €100,000 covered by a collateral with a value of €80,000, the bank will seize the collateral – discharging the borrower of that amount – and the guarantors will be called upon to repay the remaining €20,000.

The same will apply in cases of a mandatory repayment scheme sanctioned by a District Court Order, provided for under the bill.

Political parties reportedly reiterated their disagreement as regards the proposal. In most cases, they said, loans include excessive bank charges; thus, guarantors should be discharged of their obligations. Parties also noted that the banks could share some of the debt burden as an alternative solution. 

Troika technocrats argued that the bill cannot impose losses to the banks, more than those the bank would sustain after seizing and selling the property pledge as collateral.