The government is running against the clock with bad loans legislation, which would include a bill approving state guarantees for Hellenic Bank to absorb potentially high-risk loans in co-op takeover.
The President’s Cabinet will hold an urgent meeting on Thursday, under the leadership of House Speaker Demetris Syllouris as President Nicos Anastasiades is away, in order to discuss five government bills involving bankruptcy laws, sale and securitization of loans, foreclosures and property titles.
The bills are marked urgent since they include an earmark for Hellenic Bank, which has been approved in a recent deal to take over the healthy part of the troubled Cyprus Cooperative Bank (CCB).
A part of the bill would make it possible for the state to offer an asset protection scheme, reportedly around €500 million to cover for Hellenic’s potential losses on high-risk loans. Hellenic was asking for a much higher amount, according to media sources, but it was negotiated down.
But now if the protection cannot be offered promptly, the Hellenic deal could fall apart as members of parliament are scheduled to go on vacation in mid-July
The Central Bank of Cyprus’ Internal Audit director, Yiangos Demetriou, warned of catastrophic consequences if the Hellenic-CCB deal does not go forward.
But if the protection cannot be offered promptly, the Hellenic deal could fall apart as members of parliament are scheduled to go on vacation in mid-July.
Ruling party Disy leader Averof Neophytou agreed to a request by Opposition Diko party leader Nicholas Papadopoulos, asking for time so that parliament can examine all the bills that involve bad loans. A daming report by the auditor general on the CCB is also expected to be part of the discussion.
But Neophytou agreed to a July 6 deadline, suggesting this would be enough time for an ongoing investigation by the finance committee to look into what exactly took place in the troubled cooperative bank.
Finance Minister Harris Georgiades, who is being called in front of the committee on Thursday, said that the bills are absolutely necessary in terms of state asset management, a requirement by the European Union.
He also noted that measures in favour of low income borrowers are also included in the proposed legislation.
But opposition parties are expected to put terms on the table before voting for the bills, saying asset protection for Hellenic ought to be part of a bill package on non-performing loans (NPL).
The government has been trying to pass NPL legislation for some time, but opposition parties appear to have an upper hand as a vote before summer holidays could make or break the Hellenic-CCB deal.