In Cyprus, a conflict is brewing between the Ministry of Finance and the Parliament.
On Tuesday, July 20, the Ministry of Finance sent letters to the European Central Bank (ECB) and the Central Bank of Cyprus (CC), in which they expressed their concerns about another extension of the sales suspension until the end of October 2021.
Permanent Secretary of the ministry, George Panteli, said that they had asked the ECB and the CBC to express their opinion on the recent decision of the House of Representatives on a new three-month moratorium on the sale of mortgaged housing. Pantelis stressed that the new suspension of sales will weaken the position of Cypriot banks and create additional risks for them.
He also pointed out the fact that prior to the approval of the new moratorium, Members of Parliament had to consult with the European Central Bank, as provided for by the relevant Articles of the Treaty on the Functioning of the European Union and the European Council's decision.
A letter sent to Parliament by Pantelis states that “the failure of the local government to comply with the rules described above is interpreted as a violation of the acquis communautaire and, in particular, the obligation of the EU member states to consult the ECB in cases where“ legislation affects the stability of the financial sector".
By the way, the Ministry of Finance, the Central Bank and the Cyprus Banking Association have already reported on the risks of a negative rating, which negatively affects the cost of collateral, the need for forecasts and, consequently, the capital requirements of banks.
Meanwhile, the 15-day period from the date of notification to the Office of the President of Cyprus about the legislation adopted by the Parliament regarding the extension of the suspension of the sale of the mortgaged real estate will soon expire.
Government spokesman Marios Pelekanos said the president has yet to make a final decision on a new moratorium. By the way, Nicos Anastasiades has the right to return the law approved by Parliament for reconsideration within 15 days, indicating the reasons for the revocation.
If this does happen, then the members of Parliament will have to convene an extraordinary meeting and resolve the issue within 15 days. If Parliament remains unconvinced, then the President will have to issue a law within the time frame established by the Constitution.
However, Anastasiades also reserves the right, prior to the adoption of any law or parliamentary decision, to appeal to the Supreme Court and seek an opinion as to whether the Parliamentary decision is contrary to the Constitution.
In this case, the Supreme Court will investigate the request and, after listening to the views of the President of the country and members of Parliament, will issue its opinion, which will bring to the attention of all participants in the process.
As you may know, the first suspension of sales was made for the period from March to June 2020, then it was extended until August, the next suspension covered the period from December to March 2021, and the fourth moratorium was introduced from April to July 2021.
Earlier, the Cypriot authorities have repeatedly received a signal from the ECB and the Commission.
The leaders of these regulatory bodies are concerned about political interference with the sales law. According to the ECB, changes in the institutional structure for the sale of assets are not permissible. On the contrary, the legislature must ensure that changes are made that support banks' efforts to reduce NPLs, rather than lead to their possible increase.
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