Moody’s: New foreclosure law is credit positive for Cypriot banks

Moody’s: New foreclosure law is credit positive for Cypriot banks

Nicosia, April 23, 2015/ Independent Balkan News Agency

By Kyriacos Kyriacou

The new law on foreclosure will assist the Cypriot banks to step up the recovery of large stock of non-performing loans, Moody`s rating agency said in a credit outlook following the parliamentary approval of the law last week.

The law on foreclosures was a crucial requirement of Cyprus economic adjustment programme that has been postponed since the law has been postponed fourt times by the parliament.

“Implementation of the foreclosure bill is credit positive for Cypriot banks because it lays the groundwork for large-scale loan restructuring and improves the banks’ recovery prospects,” Moody`s said.

The agency adds that the laws’ approval and implementation of the foreclosure bill also allows the European Commission, the International Monetary Fund, and the European Central Bank (ECB) (known as the Troika) to conclude their fifth review of the country’s support programme and will also allow the country to access the ECB’s quantitative easing plan, that will improve bank liquidity and support modest lending.

It also notes that the foreclosure framework mainly aims to shorten the time needed to foreclose and auction real estate collateral to 18 months from more than 10 years previously.

Noting that all principal domestic banks, the Bank of Cyprus Public Company Limited, (Caa3/Caa3 stable, caa32), Hellenic Bank Public Company Ltd. (Caa3 review for upgrade, caa3) and the cooperatives (unrated), have long-established restructuring units dedicated to NPL work-outs, Moody`s points out however that “progress has been slow because individuals and companies adopted a wait-and-see attitude given the open political debate surrounding the implementation of the foreclosure law and the uncertainty regarding the level of protection the new bills would offer to borrowers.”

According to the agency, since December 2013, only 22% of systemwide NPLs have been restructured.