Property taxes to merge

George Psyllides
-
14

Immovable Property TaxTHE government plans to draft legislation “very soon,” integrating immovable property tax (IPT), Interior Minister Socratis Hasikos said on Thursday.

The minister said the government was planning to submit the bill integrating state and municipal taxes before parliament closed for the summer holidays.

“This is expected to be done very soon, possibly before the House closes,” Hasikos said.

The minister added that property values have also been reassessed.

“We will be ready in the first week of June to give the entire base of reassessed values to the finance ministry,” he said.

Discussion on the rates has not yet started, he said.

Hasikos said the €100m the government wanted to collect and the €13m from the municipalities would be merged into one integrated tax.

The minister said there will not be an increase in taxation, but on the contrary, an effort would be made to have a reduction, if possible.

“The government does not want to take more than its share according to the financing needs we have,” he said.

As part of Cyprus’ bailout agreement with international lenders, authorities had to update the values of some half a million properties.

It was initially planned that the IPT for 2014 would be levied based on the up-to-date values, but the new rates will now apply for IPT payable in 2015.

The state is currently using 1980s values to calculate IPT.

The revised property valuations were made available online for owners to view and appeal if necessary.

Owners have until the end of the year to appeal the government’s valuation of their real estate.

It was reported in April that around 22,000 people had filed forms challenging the land registry’s valuation.

Hidden mortgage breakthrough

Elias Hazou
-
14
Hidden mortgage breakthrough

Hidden mortgage breakthroughBEFORE parliament breaks for the summer break, the government intends to bring new legislation addressing the problem of thousands of home buyers trapped without Title Deeds, Interior Minister Socratis Hasikos said on Thursday, calling on banks to assume their responsibility.

“Very soon, we will submit the bill, which will really cover these cases, to parliament,” he told reporters.

“The bill will be much improved…and truly safeguard those who paid for their homes in full or who have been consistent in regard to their obligations to the seller, but still cannot get the title to the property.”

The legislation would go beyond just ensuring that those without Title Deeds – because of developers’ outstanding debts to banks – are protected from repossession.

“We will take it a step further, so that these people can take possession of the title and be able to put it up for mortgage,” Hasikos said.

“What is now taken for granted is that the banks must finally take responsibility for their actions. When they were giving out loans to developers or contractors to build an apartment block, they ought to have checked that this money was being used for that specific project and not for something else.”

“The buyers,” he added, “are not at all responsible and they must be protected.”

Although Hasikos declined to go into details, responding to a question he said that under the new legislation the buyers would not “necessarily” have to pay extra to receive Title Deeds.

Developers’ land and buildings are counted as assets that need to be offset against their debt to banks, which gives lenders a claim on people’s properties that had been mortgaged by developers.

Tens of thousands have been left without deeds as a result.

Under the terms of its bailout, Cyprus has set up a task force “on registered, but untitled, land sales contracts” that must prepare a study by the end of May. This should have been done by October last year.

Speaking to the Mail on condition of anonymity, a government source on Thursday hinted that authorities may have already completed their cost assessment of this category of mortgages.

Asked what kind of hit lenders might take from the coming bill, the source said only: “The Central Bank doesn’t have a problem with it.”

To Cyprus’ international creditors, banks’ non-performing loans, as well as their ability to recoup these, posed the single largest financial challenge facing the economy.

Loans in the red currently account for around half of all bank credit.

In March, parliament passed a bill indefinitely banning repossession of houses whose owners have no Title Deeds, even though they may have paid for them in full, as the building developers had already taken out loans on those properties which they cannot repay.

MPs basically changed a clause in the main foreclosures law that exempted this category of properties from repossession until April 30.

According to the provision, such properties will be exempted provided the buyers paid at least 80 per cent of the sale price or have fully complied with their contractual obligations towards the seller.

But the President refused to sign the bill into law and sent it back to parliament, arguing that it was unconstitutional and created ‘a general and permanent shield’, not for vulnerable groups, but a number of sellers and land developers.

Parliament accepted the president’s argument and changed ‘indefinite’ to ‘July 10.’

Bankers against massive foreclosures

Editorial
-
2
Bankers against massive foreclosures

Bankers against massive foreclosuresTHE LAW on foreclosures of mortgaged immovable properties, passed recently by the House of Representatives, will contribute to the return of clients to the negotiating table, high ranking bank officials in Cyprus have said, noting that massive foreclosures processes are not the purpose of the law.

Chief Executive Officer of the Hellenic Bank, Bert Pijls, Director of Restructuring and Recoveries at the Bank of Cyprus, Evan Hamilton, and General Manager of the Cooperative Central Bank, Marios Clerides, were the main speakers at a round table discussion organized on Tuesday by the Institute of Young Scientists on the business plans of Cypriot banks after the implementation of the foreclosures law and the insolvency framework. The event was also addressed by Chairman of the House Committee on Finances and President of the opposition Democratic Party, Nicolas Papadopoulos.

Chief Executive Officer of the Hellenic Bank Bert Pijls said that the main purpose of the law on foreclosures is to bring clients back to the negotiating table in order to restructure their loans. If clients remain uncooperative, he added, then the bank will pursue the law further, which is there to be implemented, but it is `there to be implemented with care`, taking into account that the bank also has a `social responsibility`.

In order for Cyprus to move on, he said, we need to address Non-Performing Loans and he said we must attract more foreign investors, noting that tourism is a good form of investment.

On behalf of the Bank of Cyprus, Director of Restructuring and Recoveries Evan Hamilton said that it is of great importance to solve the problem of Non-Performing Loans. Referring to the foreclosures law he said that massive numbers of foreclosures is not an issue on the menu but it constitutes a tool in order to continue the negotiation with those who owe the bank.

He described the law on foreclosures and the insolvency framework passed by the House of Representatives as a good step towards the normalisation of Cyprus` banking system. Hamilton also talked about the need to attract foreign investments.

Marios Clerides, General Manager of the Co-operative Central Bank said that the challenges for the Co-operatives have to do with the balance that needs to be found between two important aspects.

The first, he said, is the fact that the Cooperatives are handling taxpayers` money – since they are state aided – and the second is that it is a social movement which has to be gentle to its clients.

Chairman of the House Committee on Finances, Nicolas Papadopoulos, said that the Non-Performing Loans in Cyprus constitute the highest rate in the world history of banks and noted that this is mainly due to the fact that in Cyprus a bail-in solution was imposed which was implemented for the first time in the world and which made things worse. He expressed the view that after the haircut on bank deposits banks must begin examining a haircut on loans. He also said he was in favor of the creation of a `bad bank` so that banks can offer liquidity to the economy.

Papadopoulos also said that Cyprus must ask for EU assistance for the solidarity it showed as regards Greece and for the bail-in solution imposed on the island. `We have to ask our stolen money back` he said, noting that this is an important aspect in the efforts to save the Cypriot economy.

Excluded from the international capital markets since May 2011, Cyprus applied for a bailout in June 2012 to avert the collapse of its banking sector and cover its financing needs. The €10 billion bailout agreed in March 2013 with Cyprus` international lenders known as the Troika (European Commission, European Central Bank and International Monetary Fund) featured the unprecedented bail-in of uninsured deposits coupled with capital controls which plunged the economy into deep recession.

The Cypriot economy returned to growth in the first quarter of 2015 with 0.4% after a 14-quarter contraction.

– Cyprus News Agency

Draft loan sales bills leaked

Angelos Anastasiou
-
3
Draft loan sales bills leaked

deials of loan sales bills leakedCYPRIOT banks will be able to sell loans to third parties licensed by the Central Bank of Cyprus, with the regulator reserving the right to intervene in the foreclosure process to preserve monetary stability, according to the provisions of two draft bills leaked on Monday.

The two bills were prepared by a committee comprising the Central Bank of Cyprus, the Banks’ Association, the Institute of Certified Public Accountants, the Cyprus Bar Association, and the Borrowers’ Association.

Current legislation in Cyprus does not allow for the sale of loans to third parties without borrower consent, and modernising the legal framework has been deemed a “prior action” by the Troika of international lenders in its latest progress review of Cyprus’ economic adjustment programme.

According to the fifth updated memorandum agreed between Cyprus and its lenders after the review, the Cypriot cabinet must have approved the final version of these bills by the end of June.

The first bill will regulate the activities of purchasers, meaning companies – such as hedge funds or investment funds – set up to buy loans from local lenders.

Only Cyprus-registered companies, or Cyprus-registered subsidiaries of EU-based institutions, may buy loans from Cypriot banks.

Based on the bill, every loan – whether serviced or not – could be put up for sale without borrower consent, although borrowers need to be informed prior to the transaction.

But eligible buyers must first fulfil a set of preconditions, including being registered in Cyprus – this will include Cypriot banks, as well as EU-based banks with a subsidiary registered in Cyprus.

Other preconditions include full disclosure of its shareholding structure and the identity of at least its 20 largest shareholders and directors, who will be feted under the standard of “a good reputation and adequate skills, knowledge and expertise to carry out their duties”.

A person’s ability to increase his or her stake in a loan-buying company will also be subject to CBC approval, and the regulator will be able to terminate the licence granted to a firm if it is found in breach of the law.

Buyers must inform borrowers of the impending sale of their loans at least one month prior to the transaction.

“The buyer replaces the seller [of the loan] in connection with all the rights relating to any collateral linked to the loan contract,” the draft bill reads.

And on the flip-side, the buyer has the same obligations emanating from the loan contract.

Loan and collateral transactions will not be subject to taxes, fees, or other expenses, and loan buyers must inform the borrower – and any guarantors – within five working days of the transaction.

The Central Bank reserves the right to intervene and regulate – or block – the liquidation of loan collateral when it identifies a threat to monetary stability.

Minimum capital reserves for licensed buyers are set at €1 million.

In terms of oversight, the Central Bank may perform on-the-spot checks at licensed companies, and even order the sacking of a licensed buyer’s director.

The CBC may also impose administrative or monetary fines double the benefit acquired from any violation of the law, up to €200,000.

The second draft bill regulates loan securitisation – or packaging and selling loans in tranches.

According to the bill, banks may sell bundles of loans to businesses, acting as middlemen, who then issue shares or bonds – ‘financial products’ – backed by the purchased loans.

Loan buyers will not pay sellers – banks – immediately upon acquiring loans, but only after the issue of bonds or shares.

Individuals or public institutions, including the government, may also sell loans to buyers.

The issuance of financial products will be subject to the provisions of current legislation on public offerings.

And any assets, mortgages, or collateral backing purchased loans will be considered transferred to the securitisation firm.

Processing personal data, done in good faith as necessary for securitisation, will be allowed with no prior permission from the Personal Data Commissioner.

Troika approves bailout programme

Press Release
-
4

Troika approves bailout programmeFOLLOWING the recent visit to Nicosia by teams from the International Monetary Fund (IMF) and the European Commission (EC), in liaison with the European Central Bank (ECB), to review Cyprus’s economic reform programme, staff-level agreement has been reached on policies that could serve as a basis for completion of the review.

Cyprus’ economic reform programme, which is supported by financial assistance from the European Stability Mechanism (ESM) and the IMF, aims to foster economic recovery and job creation by restoring financial sector stability, strengthening public finances, and implementing reforms to increase long-run growth.

A key policy reform of the programme has been the adoption of modernised insolvency and foreclosure frameworks, which are needed to reduce the high level of non-performing loans, an essential step to restoring growth and job creation in Cyprus. The main elements of these frameworks are now in place, which has allowed for the finalisation of the staff-level agreement.

The staff teams look forward to the effective implementation of these frameworks, and will help the authorities in adjusting and strengthening them as needed, based on experience over the coming months and international best practices.

Further actions will be important to support the reduction of NPLs, including legislation to facilitate the sale of bank loans.

The authorities should maintain the structural reform momentum. The reform of the public sector administration is key in this respect. Timely implementation of the privatisation plan is necessary to increase economic efficiency, attract investment, and reduce public debt.

Conclusion of this review is subject to the approval process of both the EU and the IMF, which will be initiated shortly.

20 May 2015 – Statement from the European Commission, ECB and IMF on Cyprus

Insolvency helpline

Editorial
-
5
Insolvency helpline

Insolvency helplineTHE EUROPEAN Party (EVROKO) has set up a telephone helpline which the public can call for information about the new insolvency laws.

Members of the public can call the party’s main line, 22 460033, ask a question and leave their number. The query will be directed to a team of experts, who will then get back to the caller.

The service is already up and running. The number may be reached during normal office hours, from the morning until 5.30pm.

Announcing the helpline on Tuesday, EVROKO chairman Demetris Syllouris said its aim is to help citizens learn about their rights under the new insolvency legislation and “deal with the dangers facing them.”

The information provided will mainly focus on borrowers’ options and rights under the insolvency framework, debt restructuring, the rights of debt guarantors, loans taken out in foreign currencies, excessive bank charges and the possibility of writing off these charges.

“The insolvency framework, as it was voted, converts the borrower into the weak link in the chain, it is weighted in the banks’ favour, it is not the safety net that we envisaged,” Syllouris said.

With the current laws, he added, “borrowers’ disputes with the banks will not be resolved, but rather will end up in court, with the cost burdening the citizens.”

“We are standing by the citizens to help them understand what they have to lose and what to gain from the laws of the insolvency framework.”

EVROKO spokesman Michalis Giorgallas told the Cyprus Mail that queries should typically take less than 24 hours to be answered.

The team of eight experts comprises economists and accountants.

And according to Giorgallas, the experts have been given strict instructions to provide callers with information only – such as which department or agency to contact to deal with an issue – and not advice.

The insolvency framework – a set of laws governing personal and corporate bankruptcy – was passed by parliament last month, but not before the parties had tinkered heavily with its clauses.

The framework passed with the 33 votes of ruling DISY, as well as DIKO and EDEK.

EVROKO was among the parties who voted against.

1...357358359...696Page 358 of 696