Finance Committee seeks compromise on foreclosures

The House of Representatives Finance Committee meets on Friday to discuss a number of proposals that would normalize the legislative framework on foreclosures. 

The European Central Bank as well as rating agencies S&P and Moody's have issued warnings forecasting significant risk for the banks if the proposed legislation is approved. 

On 12 July Parliament approved amendments to the legal framework governing foreclosures that will likely hamper the banks' organic efforts to reduce large stocks of nonperforming exposures, which were 30% of gross loans as of December 2018, and also make inorganic sales of NPEs less attractive to investors.

In an effort to reach a consensus that would allow banks to tackle NPEs, DIKO presented a proposal which gives the Financial Ombudsman increased powers and jurisdiction to act as an intermediary between banks and borrowers.

The proposal foresees an increase in the Financial Ombudsman's powers to mediate in cases where no compromise can be found between a bank and a borrower in order to avoid lengthy litigation.

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

Financial Ombudsman Pavlos Ioannou said that the House should accept the rejection of the legislation by the President, provided that a new bill is proposed with measures that will provide for a comprehensive solution to the problem of non-performing loans.

Pavlos Ioannou said that if this is not politically feasible, then he suggested that the DIKO proposal be approved.