Foreclosure framework for Cyprus

An effective and functional foreclosure framework is crucial for encouraging borrowers to restructure their debt, due to the high stock of nonperforming loans (NPLs), the Cyprus Ministry of Finance said in a press release this week.

The remarks made by the ministry came as parliamentary parties have tabled a proposal enabling nonperforming borrowers who face foreclosure procedures to appeal to the courts and obtain a suspension order until the settlement of disputes such as the value of the loan in case of excessive charges, a move that banks and experts say will negatively affect financial stability.

The ministry stressed that despite the Cypriot economy’s removal from the EU’s excessive imbalances procedure, Cyprus still faces imbalances according to the European Commission’s findings, noting that the Commission ascertains that among the vulnerabilities is high private debt, including NPLs.

The ministry also noted that most loans were issued during the 2006-2010 credit expansion and were classified as nonperforming or terminated nearly two decades ago and are not associated with the recent crises that hit the Cypriot economy.