NEC urges bill to be passed “or paralyse economy”
Delays in taking decisions and in the approval of bills to update current legislation, such as the proposed bill on foreclosures of mortgaged assets of non-performing loans, is the worst practice, the National Economy Council said on Tuesday, stressing the necessity to have the bills approved.
In a position paper on issues concerning the bills on foreclosures and bank practices that was president to President Nicos Anastasiades, the Council said improvements can be made over the next couple of months, after the House of Representatives passes the bills.
The Council said the current procedure for foreclosures is bureaucratic, time-consuming and provided no protection for the primary residence or vulnerable groups of the population.
It added that the NPLs were on a level rarely encountered anywhere around the world, and were not consistent with the macroeconomics.
The Council pointed out that without the modernisation of the repossession procedure, the banks would charge high interest to cover their losses, would not grant mortgages for primary homes, and would not be able to collect and hence not be able to lend, leading to the paralysis of the economy and the protraction of the recession for many years.
Furthermore, it refers to the effect time has on the capital needs for the purpose of stress tests and thus the recapitalisation of the banks, noting that if the borrowers did not contribute, this would lead to a new haircut on deposits.
Regarding the proposed package of legislation, the Council said this reduces bureaucracy and introduces a safety net where necessary.
Speaking after the meeting with President Anastasiades and Finance Minister Harris Georgiades, National Economy Council Chairman Christophoros Pissarides said that not passing the bill on repossessions could take Cyprus back to the situation in March 2013.
The bill on foreclosures was approved earlier this week by the Cabinet and is set to be tabled before the House of Representatives for approval. It is an obligation Cyprus has to meet, as part of its agreement of March 2013 with its international lenders, that have so far released five disbursements from the ESM/IMF totalling 5.77 bln euros.
Pissarides noted that the process of repossessions should definitely be modernised and that the proposed bill was satisfactory as a first step to be followed by changes depending on the experience to be gained.
He pointed out that the current procedure which takes over seven years to repossess assets was not satisfactory for the banks nor for the economy.
Pissarides expressed concern over the consequences on the economy and the banking system from not passing the bill, and pointed out that if Cyprus regressed to the state in March 2013 when a delay to pass a fairer but wider haircut on all deposits, resulted in a harsher demand by the Troika and the closure of Laiki Popular Bank.
Pissarides said that further delay could lead to a further haircut on deposits and difficulties in recapitalising the banking system, not to mention a blow to investments. He also noted that the bill contained safeguards for primary homes and small borrowers.
The Council also submitted a study on development and prospects, which suggests ways to encourage entrepreneurship, improve the institutional environment with a view to increase productivity and projects, and address distortions in the economy.