Central Banker mulls bridging framework on foreclosures

The Central Bank will present recommendations aimed at rectifying the foreclosure framework it was announced on Wednesday.

Speaking before the House of Representatives Finance Committee Central Bank Governor Constantinos Erodotou expressed the view that a proposal put forward by DIKO can bridge the gap between opposition parties and the government.

In an effort to reach a consensus that would normalize the legislative framework thereby allowing banks to tackle NPEs, DIKO presented a proposal which gives the Financial Ombudsman increased powers and jurisdiction to act as a "shield" between banks and borrowers.

The Financial Ombudsman will examine whether all appropriate actions have been taken on the part of the bank and that loan restructuring efforts has been exhausted.

It is understood that the Central Bank agreed to study the DIKO proposal and offer a formula in consultation with the ECB that would satisfy stakeholders.

"The proposal that will be presented in 2-3 months time, in October most likely, will satisfy all sides, namely the Central Bank, the European Central Bank but also address the concerns of the Parliament," said Erodotou.

Observers have warned that tampering with the ability of banks to address non-performing loans jeopardizes the recovery of the islands' economy.

Credit rating agency Moody's said that failure of Cypriot banks to reduce NPEs will increase provisioning needs for the banks.

Sources ruled out the option of referring the legislation to the Supreme Court, pointing out that such a process will take time, which will consequently create an unfavourable economic climate due to legislative uncertainty.