Banks voice serious objections to debtor protection plan

Banks are expressing serious objections to the government blueprint for the new system to protect debtors’ primary residences. Their criticism focuses on five main issues which, if not taken into account, would undermine the effort to reveal strategic defaulters and could create a new pool of borrowers who are unwilling to cooperate, according to credit sector officials.

Firstly, banks are demanding an overhaul of the system the government is proposing so that it includes a single bankruptcy framework for all individuals, as credit sector officials say the change to Article 9 of the Katseli law would lead to a parallel bankruptcy code operating through the online platform to be created, alongside the process in courts and the process for the protection of holders of bad corporate loans secured against their main residence.

Another objection concerns the demand that any debtors found to be ineligible for protection through the platform’s automatic screening should not get any provisional protection.

Banks further insist on the compulsory eligibility screening of the approximately 155,000 applications for protection through the Katseli law, whose beneficial measures end on February 28. Those debtors now have provisional protection, but should lose it if found to be ineligible.

In cases where the state will subsidize the installments of debtors genuinely unable to pay their dues, as the government plan provides for, banks say this should be done without any court procedures, to avoid any delays.

Finally, lenders say that the new protection framework ought to have a specific life span, which should not exceed one year. An exception could be granted in the cases of unemployed or disabled borrowers, for which the measure could be extended to three years.

Banks are also proposing the following measures to stop strategic defaulters’ tricks: that foreclosure orders should automatically render debtors ineligible for protection, and that the asking price for a property in a failed tender should not be changed for at least a year after confiscation.