CBC prepares draft law on sale of loans and securitisation

A Central Bank draft law on loan sales provides that loans could only be sold to companies resident in Cyprus, in addition to subsidiaries of credit institutions in other EU member states.

This settles the concerns by investors and politicians alike that mortgaged Cyprus properties that have defaulted may end up in foreign hands, particularly Turkey.

The CBC may also intervene in the rate of disposals of immovable properties to safeguard the financial stability in the Republic, the frat law says, and to check in detail the natural and legal persons hidden behind the credit acquiring companies.

At the same time, the Central Bank prepared a second draft law on loan securitisation.

The two bills, according to the Cyprus News Agency, are discussed in a Task Force established under the CBC, with the participation of representatives of commercial banks, the Banks Association and Certified Public Accountants of Cyprus (ICPAC), the Bar Association Borrower Association.

Among other issues, they examine the obstacles to the transfer of individual loans or loan portfolios to third parties, which may arise from the loan contracts, collateral agreements and existing legislation.

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The adoption of the two bills by the Cabinet by the end of June is a prior action requested by the Troika of international lenders. Under the fifth update of the Memorandum, the Cypriot authorities should remove any obstacles to the transfer of loans to third parties, while the consent of the borrower should not be required, as it is the case today.

According to the draft law, all loans, performing and non - performing could be sold.

It also stipulates that a company which intends to engage in credit acquisition may apply to the Central Bank by presenting the identity of its shareholders, whether direct or indirect, natural or legal persons, who have qualifying holdings and the amount of this holding or, if there are no qualifying holdings, the identity of the 20 largest shareholders.

Under the third part of the proposed law (supervisory powers and requirements), the Central Bank may intervene in the rate of disposals of immovable properties, by issuing general or specific directives or guidelines.

A second bill called “The securitisation law,” allows the creation of an organisation, in which the banks assign or sell their loans and the organisation issues either shares or bonds to secure the loans granted.

The guarantor under the proposed law can be either a person, including the government, or any public authority.

Meanwhile, parliament has approved the regulations on auctions, paving the way to banking institutions to conclude foreclosures proceedings.

During their regular session Thursday, 33 MPs voted in favour of regulations, while 21 voted against.

Banking institutions in Cyprus may now activate foreclosures proceedings, a crucial requirement of the island’s 10 bln euro bailout programme. last the