Cyprus’ new foreclosure framework hampers banks efforts to reduce NPLs said credit rating agency Moody's in an announcement on Thursday.
On 12 July Parliament approved amendments to the legal framework governing foreclosure that ''will likely hamper the banks' organic efforts to reduce large stocks of nonperforming exposures (NPEs), which were 30% of gross loans as of December 2018, and also make inorganic sales of NPEs less attractive to investors''.
Moody's said that failure of Cypriot Banks to reduce NPEs will increase provisioning needs for the banks.
''The amendments will likely make it more challenging for banks to foreclose on collateral held against defaulted borrowers. Importantly, the amendments broaden the reasons based on which a borrower may appeal the foreclosure process and challenge a property's auction, which will likely cause long delays in the process because of inefficiencies in Cyprus’ judicial system, with long delays and a big backlog of cases.''
Following the vote in Parliament Finance Minister Haris Georgiades said that the parliamentary decisions undermine public interest, announcing the intention of the government to block the move and refer the decision back to Parliament.