Banks fear bankruptcy loopholes

The new bankruptcy code being drafted is evolving into a bone of contention between the government and banks.

The credit sector fears that the bill, which would allow a state entity to buy and lease back to debtors their homes, includes loopholes that could lead to a repeat of phenomena generated by the protection framework of the last decade, known as the Katseli Law.

The government, for its part, is trying to soften the impact on vulnerable borrowers from the abolition of measures protecting their main residence from foreclosure.

Talks between the two sides for the completion of the bankruptcy code blueprint – intended to be voted into law next month – are being monitored closely by the country’s creditors, who believe that the lifting of the main residence’s protection, the abolition of the Katseli Law protecting debtors and the passing of the new bankruptcy code, constitute a decisive landmark in their relations with the country.