EU CITIZENS will have the right to a basic current bank account in any country of the EU and compare the fees charged by banks under new European legislation plans. The European Commission suggested that they are drafting a proposal to make it easier for customers to compare charges and switch to another bank.
At present, many consumers find it difficult to open an account in another EU country where they are not residents. The Commission will also aim to reduce the numbers of European citizens who do not have accounts (they estimate that around 58 million consumers across the EU, aged over 15, do not have a payment account).
Only France, Belgium and Italy have laws in place that ensure people have access to a basic bank account in line with the proposals.
The new EC directives would mean anyone could potentially open an account (even in instances where they have been made bankrupt or unemployed). This would allow them to perform basic operations such as to receive their salary, pensions and benefits, or to pay utility bills. The EC will also ask banks to send information to customers that list the fees for common services, and the charges that have been levied in the previous 12 months.
The EC wants this to be implemented (i.e. free switching between providers in different EU countries) within 30 days.
AFTER weeks of tense negotiations, a majority of MPs voted in favour of a provisional Immovable Property Tax (IPT) bill earlier this week at a special session of the Cyprus parliament.
By revising the Immovable Property Tax framework, it has been estimated that the government will collect approximately €136 million.
Under the provisions of the bill, which is needed for Cyprus to secure the much-needed first tranche of a €10 billion bailout at the start of May, all registered owners of property will be liable to pay a minimum of €75.
Government spokesman Christos Stylianides has acknowledged that the authorities lacked the time to gather sufficient information to prepare a comprehensive bill – and that further information will be collected in the weeks ahead to ensure that any distortions are removed by the time a fairer final proposal is put before parliament by the end of June.
Stylianides noted that there are areas in Limassol, Nicosia, and Larnaca where houses worth millions of euros have been built which do not have building permits. At the moment, these are registered as building plots or agricultural land.
The provisional bill also penalises registered owners of property who fail to pay their Immovable Property Tax by 30 September each year. Originally the penalty was set at 20% on the tax due – but was reduced to 10% with a 10% reduction if the tax owed is paid 30 days or more before the deadline.
As before, IPT is calculated on the Land Registry’s assessment of the value of a property at the 1st January 1980; the new tax bands are as follows:
THROUGHOUT recent weeks Judicare has had contact with the lawyers of Alpha Bank in order to investigate the possibility of reaching a settlement with the Bank in relation to existing Loan Agreements. These settlements relate only to clients who do not have a strong case in Court or who want to keep the properties purchased.
For clients who feel that this service of restructuring their obligations under existing loan agreements in Cyprus is one they would like Judicare to offer to them, or for those clients who may have attempted to discuss their own particular situation with the bank without success and wish us to assist, the following framework has been agreed (always subject to the special characteristics of each individual case).
A discount on the balance of the loan (mainly in relation to the amount concerning the interest).
Formation of a new loan agreement (possibly in a different currency than the existing one).
Extension of the repayment period hence, lower instalments and a more manageable loan.
It should be most emphatically clarified that this approach is not designed to reach or attempt to reach a “settlement figure” with the bank to rescind the original loan agreements and in no event has any impact whatsoever upon those existing clients of Judicare who are challenging through the Cyprus Courts, the validity of their loan agreements or indeed any purchasers who have a good legal case in Court in view of the circumstances surrounding their situation and who do not wish to retain the immovable properties purchased.
Neil Heaney from Judicare comments “we don’t believe there is a silver bullet or panacea which is going to remedy the situation; despite some very grandiose sounding rescue plans being circulated. What is important is each client is treated as an individual and their particular position is reviewed and their objectives are clarified. Once this is completed, decisions and solutions can be implemented through either negotiation or litigation dependent on the facts of their case. We remain at the disposal of any client wishing to explore their options in this regard”.
THE Royal Institution of Chartered Surveyors (RICS) and other leading property institutions from around the world are meeting this week at the World Bank in Washington DC to launch an initiative aimed at developing a consistent international property measurement standard.
The coalition, which represents more than a quarter of a million professionals around the world, is coming together to address the challenge of inconsistent global property measurement standards, which result in low investor confidence in property, inconsistent financial data and, ultimately, global economic instability.
At present, the way property assets – such as a housing development, office block or shopping centre – are measured varies wildly from country to country.
An example of current inconsistency is the way in which floor space is calculated. For example, in Spain, floor areas have been measured to include outdoor swimming pools; in parts of the Middle East they can include the hypothetical maximum number of floors that could be built on the existing foundations; and in Australia, measurements have included outdoor parking spaces, even when they are not physically adjoined to the property itself.
With so many different methods of measurement available, it makes it difficult for those looking to invest in these developments to compare like with like. This confusion can affect property values, lead to errors in financial reporting and, consequentially, undermine market confidence and economic stability.
The introduction of a universal standard for property measurement would ensure global consistency, leading to fewer instances of fraud, a more transparent market, greater public trust and increased economic security.
Convened by RICS, this initial meeting of the International Property Measurement Standards Coalition (IPMSC) is the first step to delivering this consistency which will provide:
greater global financial stability
more accurate and consistent financial reporting
stronger investor confidence
greater transparency of data
reduced risk of fraud.
The IPMSC aim is to resolve disparities by developing and implementing International Property Measurement Standards, a set of standards for measurement that are principles based and internationally applicable, to be adopted by all nations across the globe.
This is a groundbreaking initiative which has the potential to deliver huge benefits, both to real estate markets and to the economies and the populations they support around the world, by creating a level playing field for the way property is measured, valued and ultimately reported in financial statements.
The organisations involved in the IPMS include:
Appraisal Foundation – North America
Appraisal Institute – North America
Asia Pacific Real Estate Association (APREA) – Asia
Associação Brasileira de Normas Técnicas (ABNT) – Brazil
Australian Property Institute – Australia
Building Owners and Managers Association International (BOMA) – Global
China Institute of Real Estate Appraisers and Agents (CIREA) – China
CLGE – Europe
CREDI – India
Commonwealth Association of Surveying and Land Economy – Commonwealth nations
CoreNet – Global
Counsellors of Real Estate (CRE) – North America
FIABCI – Global
Global FM – Global
International Consortium of Real Estate Associations (ICREA) – Global
International Facility Managers Association (IFMA) – Global
International Federation of Surveyors (FIG) – Global
International Monetary Fund (IMF) – Global
International Valuation Standards Council (IVSC) – Global
Royal Institution of Chartered Surveyors (RICS) – Global
RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society. RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.
CYPRUS is now famous! The first country in which depositors got “bailed-in” to save a disproportionate and inefficient banking system. It’s almost as good as being known as the kid with the most acne in high school.
So, where are we now and where are we going?
Regarding the economy, it is clear that both the deposit “haircut” and the prolonged capital restrictions have created a toxic combination that is going to have a significant impact on the real economy; much greater than originally envisaged in the Memorandum that Cyprus has agreed in order to obtain access to the much needed funding from the Troika. Whilst the Memorandum refers to a contraction in GDP of circa 8.7% in 2013, the reality is that this is likely to be close to double that (if not more).
There are four reasons that will cause the economy to shrink significantly in 2013 (and 2014).
Firstly, Cyprus’ banking system was eight times its GDP and it has now “lost” circa 1.5 times its GDP from the sale of the Cyprus’ banks operations in Greece.
Secondly, the prolonged capital restrictions have caused a massive loss of credibility to the banks’ international business operations (their most profitable segment) and strained relationships between companies and their suppliers/clients.
Thirdly, the reduction in the inflow of capital to Cyprus has/will cause a significant impact on the economy via the multiplier effect.
And finally, even during this past month companies have already started laying off staff and cutting salaries by 15-30%.
We expect that the deterioration in the economy will accelerate over the next six to nine months, peaking in the last quarter as the seasonal unemployment caused by the end of the tourist season adds an additional burden to the overstretched public finances. 2014 is likely to be an even harder year, as companies and households are faced with a lower level of savings (since they will draw some down over the second half of 2013) and there will be a complete lack of financing from banks.
As banks are at the centre of the Cyprus economy, a quick comment is warranted on the (forced) merger between Bank of Cyprus and Laiki Bank.
The two banks had a combined market share of circa 50% and merging them will create a behemoth which will dominate the local banking industry. However, the new Bank of Cyprus will not be a ‘bank’; at best it can be described as an asset management company with banking operations attached to it. With Laiki Bank having one of the highest non-performing loan (NPL) portfolios and Bank of Cyprus already having its own set of problems before the “haircut”, the merger of the two entities will create an organisation whose main job over the medium term will be to take control and manage the loans and assets that it already has. With the Greek operations gone and international business uncertain, the bank’s main focus will be asset management and damage limitation (effectively the new Bank of Cyprus will be the “Bad Bank” envisaged in the original MoU agreed in November 2012 – and whose reference is suspiciously omitted in this MoU). Given that the new Bank of Cyprus will control such a significant part of the Cyprus economy, it will effectively be the bellwether of the Cyprus economy.
The Cyprus consumer is already retrenching, but not as much as it should be doing. Cypriots tend to enjoy living in denial (this is also illustrated by the lack of action as the economy deteriorated), and this situation is the perfect time for them to do just that.
The human brain is unable to comprehend large things – if you lose €10 you can appreciate what this means/feels like because you know what that amount can buy; the same for €10,000 or €100,000. But what does €23bn mean? (the amount that Cyprus’ banks are expected to require). Thus, for now, Cypriots are still going round drinking coffee, having dinner with friends, and booking holidays, having a hard time appreciating what has happened (and what will happen). You do need to live in denial at times. It’s a kind of a weird, almost dream-like, state – makes you feel bit detached from everything going on around you.
And does property present a good investment opportunity at this point in time? Is it now the time to protect your savings by buying assets or buy property at distressed prices? No. The Cyprus government is in the process of raising the Immovable Property Tax (IPT) and it has already announced that its going to revise it further over the next six months.
Property is one of the easiest assets to tax, as there is a central registry of owners and assets (the Land Registry). Furthermore, in terms of pricing, generally speaking, property remains overvalued relative to income, more so now that income is going to decrease significantly over the medium term and there will be a lack of finance. Finally, until the situation in the banking sector settles down and Cypriots fully appreciate what has happened, banks will be unwilling to sell their assets at a significant discount to book value.
There are always opportunities in the marketplace, but these are likely to be income producing assets (ideally with an income derived from overseas, e.g. hotels, airports, etc), assets that require the owner to “sweat the asset” by maintaining and property managing it, and properties that require significant capital/ turnaround, e.g. refurbishment, half-finished developments.
An area where we see considerable scope is that of short-term business lending, where an investment company provides short term finance (three to five years duration) to operating companies who wish to finance their operations or carry out specific projects. At the end of the day, with banks being in a state of consolidation, the best way to make money is for you to “be the bank” and have no competition whilst doing it.
About the author
Pavlos Loizou MRICS is the Managing Partner at Leaf Research
Leaf Research is a real estate consulting firm, providing high quality real estate market research, strategic consultancy, valuation, and financial modelling.
President of the Republic of Cyprus Nicos Anastasiades (Source: Cyprus News Agency)
EARLIER today President Anastasiades presented a package of measures for the modernisation of the institutions and state, assuring the citizens of his determination and that of his government to meet the expectations of the society for a new bold start.
The measures include the introduction of rules of good governance, combating corruption, collusion and established bad practices, promoting meritocracy and egalitarianism, and reforming public administration, with the active involvement of the citizens and a deadline for the implementation of the action plan expiring at the end of December 2013.
Presenting the measures, President Anastasiades said that it was imperative to restructure and modernise the state, and restore the trust of the confidence of the citizens in the institutions and especially in the politicians.
“Concepts, such as meritocracy, good governance, the liability of politicians, the obligations of the state towards its citizens, which were until recently meaningless declarations, today, due to the consequences of the financial crisis, constitute a national necessity,” he said.
The President pointed out that the measures announced today and any to follow would prove that he was sincere, and dismissed allegations based on the Eurogroup decisions that he had defaulted on pre-election commitments, calling on everyone to ponder if they preferred a leader to either be likable or take unpleasant but beneficial decisions.
“I would like to assure the citizens of my determination and that of my government to meet the expectations of the society for a new bold start,” he said.
Referring to the measures, which were discussed by the Council of Ministers, he said that with a proposal to amend the Constitution the offences for which a President of the Republic could be prosecuted are laid out and expanded.
Furthermore, the freedom of speech and the freedom of MPs to vote during their legislative duties, is secured, however their immunity for all forms of offences is lifted.
Criminal and civil liabilities of ministers and independent officers for actions or omissions during the carrying out of their duties will be regulated by law, and the list of officials who should present a statement of assets is expanded, while a special committee will be checking the correctness of the information supplied.
Furthermore, the House has already passed into law that the unanimous findings of investigative committees are binding for the official in question, while the Attorney General, apart from the Council of Ministers, will now be able to appoint criminal investigators.
Regarding good governance and the combating of corruption, the President said tenders awarded should be justified and also publicised, audit committees would be set up at each Ministry to monitor corrective measures for issues noted in the report by the Audit Office, and Ministries and public organisations must present reports on corrective measures noted by the Audit Office, along with the submission of their proposed budgets to the House. Similar measures will apply for municipalities and communities.
It will also be obligatory to keep detailed minutes of meetings in any public organisation or authority taking administrative decisions, and these will be publicised, except in the cases of national security, defence, and international relations, which may be confidential or concern personal data.
The law concerning the authorities of the Ombudsperson is amended, enhancing the institution’s role, and the civil and criminal liabilities of civil servants are set out for damage due to inexcusable negligence or fraudulent behaviour constituting collusion.
Regarding the combating of collusion and established bad practice, President Anastasiades said the provisions of the Constitution and the law would be amended so that it would not be possible to run for re-election to the post of President of the Republic for more than two consecutive terms in office, and the same would apply to mayors and community leaders, while the office of MPs, and municipal and community councillors would be restricted to three consecutive terms.
On meritocracy and egalitarianism, President Anastasiades said there would be criteria for any permanent position in the public or semi-governmental sector, and the boards of directors would be relieved of the responsibility of employing or promoting persons.
Regarding the reform of public administration, he said noted the appointment of a Commission for the Reform of the Civil Service, who would be submitting an action plan within three months, with specific proposals for the reform of the public sector.
Furthermore, the reform of the civil service would be regulated through legislation which will be sent to the House for approval, containing aims, ways to monitor developments, indices to measure the quality and effectiveness of the services, and ways to improve administrative procedures and simplify the issuing of decisions.
Another bill regulates the obligation of public organisations to submit to the Council of Ministers a strategic and operational plan, which will be compatible with government policy.
For the more effective and smooth functioning of the state, a proposal is included for the establishment of a number of Deputy Ministries. The relevant bill has been sent to the House for approval along with a fully justified report, the President said.
President Anastasiades also referred to the active involvement of citizens in policy-making, noting that measures enhancing immediate democracy have been introduced.
Furthermore, Administrative Courts will be set up to decongest the Supreme Court, departments of primary jurisdiction are strengthened, a Court of Arbitration will be established to try cases concerning bonds, a Banking Ombudsperson will be appointed to deal with cases so far of primary jurisdiction, and the state will fully comply with cancellation decisions by the administrative courts.
President Anastasiades said that all proposals should be ready by June 15 at the latest, and that the measures announced on Monday would be effective as soon as the House of Representatives approved them.
The Council of Ministers also decided on April 24 to set up a monitoring mechanism for the government’s programme. The President said the mechanism had already begun work and would be presenting monthly reports.
President Anastasiades said the need for a new model state was also the wish of the political forces, and thus called on them to give priority to the examination of the bills, in order “to jointly create the modern state we owe our citizens.”
