ECB says aid review judgment on Cypriot insolvency law outstanding

Cyprus’ international lenders have yet to decide if recent changes to the island’s insolvency law are enough to allow an outstanding review of its aid programme to be concluded, theEuropean Central Bank said on Monday.

Earlier this month, lawmakers in Cyprus approved legislation governing foreclosures, paving the way for the island to join the ECB’s sovereign bond-buying programme.

But the ECB said no final decision had been taken as to whether the Cypriot action was enough to meet the terms of its aid-for-reform programme.

“The three institutions (International Monetary Fund, European Central Bank, European Commission) are currently in Nicosia and reviewing the detailed information on the insolvency frameworks and other laws that theCypriot parliament passed,” said a spokesman. “A final assessment on whether recent actions suffice to close the current review has therefore not been taken yet.”

Earlier, the Central Bank of Cyprus (CBC) said international lenders began talks on the island on Monday to try to pave the way for a resumption of bailout payments after the island passed a law on foreclosure of bad loans.

The CBC  said that technical banking teams from the European Union, the International Monetary Fund and the European Central Bank (ECB) would be on the island until April 30, and again from May 6.

They will discuss “issues concerning restructuring of non-performing loans and supervision matters” and have meetings with commercial banks, a Central Bank spokeswoman said.

The  island signed up to a 10 billion euro bailout deal in 2013, due to run until 2016, that was conditional on a range of budget and economic reforms.

It has received just over half of that amount, but had to adopt a foreclosures framework to wrestle down a mountain of non-performing bank debts before further aid could be disbursed.

The law was passed on April 18. If the lenders give it a positive assessment after their meetings, this will also allow the ECB to buy Cypriot sovereign bonds as part of its money-printing programme.

Cyprus, a member of the eurozone since 2008, has until now been excluded from the ECB’s 1.1 trillion euro quantitative easing (QE) programme, launched in March.

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