FINANCIAL Ombudsman Pavlos Ioannou has urged borrowers and banks alike to continue honouring their obligations, and refrain from rushing to make any changes that could harm their interests, as this week’s agreement between the government and political parties on how to tackle the issue of non-performing loans will not see any result for several months.
In a note published by the Cyprus News Agency, Ioannou called for patience as decisions taken at the meeting of political party leaders with President Nicos Anastasiades on Thursday will take at least four to eight months to yield any results.
The meeting, Ioannou said, could be seen as a motivation to change one’s behaviour that could affect the choices of banks and borrowers.
He stressed that anything that arises from decisions taken at this meeting, but also under a relevant home loan rescue scheme that is expected to be announced soon, will in no way involve an across-the-board haircut of loans.
References to loan haircuts, he said, are completely wrong in their wording and “far from the result of using the tools available in any rational NPL (non-performing loan) management system”.
The correct term that should be used, where and when it is required, is ‘loan impairment tactic’ with the ultimate strategic goal of achieving sustainable restructuring of NPLs, he said.
Ioannou said that banks ought to continue to abide by and apply the code of conduct issued by the Central Bank concerning NPLs where required, and for other cases, to use rational restructuring measures, where relevant.
Borrowers, he said, should serve their interests in the most favourable way, by continuing to repay their loans and if this is not possible, to call on the lending bank to apply the central bank’s code.
Ioannou said that his office is open to everyone seeking assistance and advice concerning NPLs.
The government and political parties agreed to set up a committee of experts to study proposals designed to tackle NPLs and formulate a national strategy to deal with the problem, taking into account all of the parties’ interests.
As of November 2017, Cyprus’ system-wide NPLs comprised 44 per cent of gross loans. According to Finance Minister Harris Georgiades, Cyprus’ private borrowing grew significantly between 2003 and 2012, creating the problems it is now faced with.
