President of Cyprus Doesn't Support Moratorium On Foreclosures

Президент Кипра против очередного моратория на продажи залоговой недвижимости
26 July 2021 Liza Medvetskaya

The extension by the Parliament of Cyprus of the moratorium on foreclosures until the end of October 2021 can be blocked.

As it turned out, the country's President Nicos Anastasiades did not support this bill.

On Saturday, July 24, Anastasiades sent the bill back to Parliament for reconsideration. In his letter to the deputies, the president said that another suspension of sales in the current unstable time will have a negative impact on the banking system in particular and on the country's economy as a whole, since temporary measures have become permanent.

Anastasiades stressed that the decision of the Parliament is contrary to the Constitution, namely Article 26, which includes the right to formulate the content of the agreement at the free will of the parties. And also the principle of separation of powers, since the legislature interferes, in his words, with the responsibilities of the executive.

Subsequent interference of deputies in the Law is incompatible with freedom of contract, the president said in a statement.

The President adds that the suspension of the sale of pledged property has continued from December 2020.

This measure has ceased to be temporary, both for borrowers and for lending institutions, due to the constant extension by a vote of the House of Representatives.

As you may know, the last time officials decided to suspend the sale of property, which is used as the main residence and the value of which does not exceed 350 thousand euros.

Also under the moratorium were the commercial premises of companies whose annual turnover does not exceed 750 thousand euros. Finally, the government froze the sale of agricultural land worth up to 100,000 euros.

According to Anastasiades, the suspension mainly protects strategic defaulters and increases the risk of downgrading both banks and the state.

In addition, he points out that the horizontal suspension of the process of sales of collateralized real estate is associated with an increase in budget expenditures, since this makes it impossible to repay the collateral of borrowers, which leads to an increase in banks' need for capital and loans to improve the country's rating.

The suspension until October 31, 2021, as already noted, further weakens the asset sale tool and may create additional risks for banks, since there will be no incentives for sustainable loan restructuring, which means that the risk of default will increase. In addition, there will be additional problems in the strategic planning of banks to optimize their balance sheets.

Anastasiades stressed that "in the absence of appropriate incentives with a well-thought-out, stable and integrated legal framework for resolving disputes between borrowers and banks, there is a risk of socializing losses to the detriment of healthy economic units and financial stability."

Thus, the Cyprus Parliament will have to revise the already approved amendments.

Otherwise, the President of Cyprus reserves the right to report a violation of the Law to the Supreme Court. Pending a final decision, legislation will be in effect, according to which the suspension of sales will be carried out until July 31, 2021.

Президент Кипра против очередного моратория на продажи залоговой недвижимости

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