KPMG has been selected to prepare a plan on how to turn KEDIPES into a bad bank.
The company will develop a strategy according to which KEDIPES will buy out problem loans from financial institutions in Cyprus, as well as implement the Mortgage to Rent plan.
It is worth noting that KPMG was selected as a result of a competition in which various Cypriot and international companies took part. It is expected that technocrats from KPMG branches in Ireland and Italy will provide consultations on the project, as they have significant experience in managing such cases.
In particular, employees from KPMG Ireland took an active part in the implementation of the Mortgage to Rent plan, which the Irish government has promoted and continues to successfully implement as a social measure to protect the first home.
A representative of Achilleus & Emilios, Konstantinos Imilianidis, will be KPMG's legal adviser on this project. By the way, Achilleus & Emilios participated in a joint tender submitted by KEDIPES.
As expected, the bad bank will buy all non-performing loans from Cypriot banks. According to the latest data, the volume of red loans in the national banking system is approximately 5.1 billion euros.
Currently, KEDIPES manages 60 thousand loans. The assets of KEDIPES amount to 7,695 million euros. At the same time, 145 million euros account for cash, 657 million euros for real estate, 569 million euros for loans.
KEDIPES intends to buy loans from local banks and companies in the amount of 1.5 to 2 billion euros by 2023. The final figure will depend on the audit firm's research.
It is noteworthy that the transformation of KEDIPES into a bad bank will not burden taxpayers, since the company will buy MES banks at its own expense. In order for KEDIPES to become a national asset management company, it must be recognized by the supervisory authorities in Brussels and Frankfurt.
As you may know, a group of technocrats from the big three, who visited Cyprus in March last year as part of an audit, called on the Cypriot authorities to create a national asset management company.
International lenders and supervisors in Frankfurt suggested that a bad bank would be successful if an independent committee, rather than government officials, handled part of corporate governance.
The beneficiaries of the new plan will be individuals with overdue loans to secure the first residential or commercial property, the market value of which does not exceed 350 thousand euros. At the same time, credit recipients will be able to use the new scheme regardless of whether they have previously participated in other state support schemes or not.
In parallel with the acquisition of property, KEDIPES will sign a lease agreement with problem borrowers. It is expected that the amount of annual rent will be from 2% to 3% of the market value of housing. The rent will be adjusted regularly under certain conditions. At the same time, for borrowers who belong to vulnerable groups, the annual rent, including any increases, will be paid by the government.
If the age of the owners of the property as of December 31, 2021 is more than 65 years, they will be able to permanently reside in their house for the rest of their lives, provided that the appropriate rent is paid. The project participants will have the opportunity to buy the property within five years at the cost of its acquisition by KEDIPES, minus the rent paid.
Close relatives (children and parents) will have the right to buy out on the same terms as the owner. At the end of the five-year period, KEDIPES will be able to sell the property, and the owner will receive the first right to purchase the property at the price that KEDIPES will set. Thus, problem borrowers will have the opportunity to rent their former property with the right of further redemption.
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