The Cyprus Banks Association decided to preempt legislation, suspending foreclosures on primary residences, valued up to €350,000, by announcing a freeze on repossessions of these residences until March 2021. In an announcement issued on Thursday, the association said its members were “taking into account the prevailing economic conditions,” and would suspend the procedures for the sale of mortgaged real estate properties with a current value of up to €350,000.
The prevailing economic conditions, had very little to do with this decision, which was primarily caused by political pressure. Opposition parties had been discussing forcing the suspension by law and the banks calculated that by taking the decision themselves there would be no need for a law, which populist deputies would be inclined to extend at the end of March, with parliamentary elections being less than two months away.
The banks had made an informal pledge not to move against primary residences in this value range, but may have realised this was not enough to stave off the planned legislation and therefore made the decision official. Last week Finance Minister Constantinos Petrides had urged them to apply targeted suspensions until March, aware that the passing of a law to this effect would have been noted by ratings agencies.
Need it be said that non-payment of the majority of these loans predates the pandemic? According to the central bank 80.6 per cent of non-performing loans with the primary residence as security, register repayment delays in excess of six months. Of these, 34 per cent have delays of one to five years while 31 per cent show delays of five to 10 years and 15.6 per cent more than 10 years.
The pandemic is being used as an excuse for people that are blatantly trying to get out of repaying their bank loans. Is there any other country in the world with rule of law in which a borrower can get away with making no loan repayment for several years and still be able to hold on to the mortgaged property? It is not his ownership.
In Cyprus, however, populist parties not only pretend they are showing social responsibility by protecting the dishonest, they also make out that banks are in the wrong for wanting to recover the loans they gave. Now, demands are being made about also extending the suspension of loan repayments beyond this year and it would be no surprise if the political parties take up this cause as well.
The reckless irresponsibility of the political parties a few months before parliamentary elections must not be underestimated because they are capable of creating yet another banking crisis with their brainless populism.
