By Elias Hazou
THE Cabinet yesterday green-lighted the establishment of a project team tasked with implementing new insolvency procedures.
According to a statement, the team will comprise of at least three officers from the Department of Companies and Official Receiver, as well as the finance ministry, which is the project manager.
Where necessary, the team will work and liaise with the public administration and personnel department, the ministry of labour and social insurance, the ministry of the interior and the ministry of justice, the finance ministry’s Department of Information Technology Services, and the Treasury.
Under the terms of its bailout agreement, Cyprus must by year’s end enact new insolvency legislation to facilitate debt restructuring.
Government technocrats and lawmakers are currently hammering out an omnibus bankruptcies bill. A committee has been set up comprising a representative from each of the parties, save AKEL, who declined to participate.
The insolvency legislation – consisting of six items – is designed to complement foreclosures-related legislation, the aim being to weed out uncooperative borrowers and give solvent debtors incentives to settle their arrears with banks.
Ultimately, the goal is to reduce bad loans on banks’ balance sheets, around 50 per cent of whose loan portfolio is currently classed as non-performing.
According to reports, the six items comprising the omnibus bill are: a new personal insolvency law; an amendment to bankruptcy law; an amendment to the Companies Law, streamlining and speeding up liquidation; an addition to the Companies Law regulating viable businesses under examination; a debt restructuring scheme for viable businesses, placed under administration; and regulations governing the profession of insolvency consultants.
The recovery of non-performing loans and of distressed assets is a key component of the memorandum of understanding (MoU) on specific economic policy conditionality.
As part of financial sector reform, the MoU calls for a reform of the debt restructuring framework “with a view to facilitating the voluntary workout of non-performing loans, avoiding strategic defaults by borrowers.”
