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Another step has been taken in the Government’s quest to ensure the passing of the mandatory foreclosures legislation; a prerequisite for the disbursement of the next tranche of the island’s €10 billion financial assistance programme.

The Council of Ministers has approved new bills for the protection of troubled borrowers who have pledged primary residences as collateral, the Cyprus News Agency reports.

The decision, made Wednesday, has come in response to a flurry of objections to the bill on foreclosures of mortgaged properties, which, should it not be passed, risks endangering the viability of Cyprus’ economic adjustment programme.

Government Spokesman Nicos Christodoulides announced that these bills concern the abolition of banking privileges for abusive financial services clauses, the amendment of the interest rate liberalisation law so that it will be applied to all existing contracts and credit facilities, the abolition of banks’ right to unilaterally increase the interest rate margin of credit facilities, and to inform borrowers and their guarantors on the changes of the base rate and the time of rate payment.

Now, following the Cabinet’s decisions, banks will be obliged to publish the interest rate calculation method, while the Central Bank of Cyprus (CBC) has the capacity to impose administrative fines and to penalise banks that do not comply with the new provisions.

These decisions have been taken in a bid to convince parliamentary parties to approve a bill on foreclosures of mortgage properties, which should be approved and put into force by the end of August. The latter is a precondition for the disbursement of the next tranche of the island’s €10 billion financial assistance programme. 

Some political parties fear that if approved the law on foreclosures will pave the way for a wave of repossessions of primary residences, including those belonging to vulnerable households that have suffered at the hands of the financial crisis.

Christodoulides confirmed that President Nicos Anastasiades intends on sending a letter to parliamentary parties, briefing them on the new decisions, which will, furthermore, be discussed come Friday when a Council of political leaders will convene.

The Government has also decided to include in the law a provision allowing borrowers to appeal either to the CBC’s Governor or the Attorney-General over the violation of the CBC’s Arrears Management Directive, or any other of the CBC directives on loan restructuring.

“If the Attorney-General ascertains a violation or that the provisions of the Code of Conduct have not been implemented, then the foreclosure process will be suspended until the conclusion of the legal process,” Christodoulides explained.