"The re-acceptance of applications for the rent-for-installment scheme or the introduction of a new state scheme at this stage is not considered viable and is expected to have a low degree of success," Minister of Finance Makis Keravnos has underlined, among other things in his response to a relevant question from EDEK MP Andreas Apostolou, referring to two significant - as he characterises them - obstacles to a new scheme for non-performing loans.
More specifically, the MP, in his question, called on the Minister of Finance to inform Parliament whether the reinstatement of the 'Rent versus Installment' scheme is planned and, if so, whether there will be any changes to it, with the aim of increasing the number of beneficiaries.
Apostolou also requested information on whether there is political will to implement another plan, aimed at protecting the primary residence of all those who were unable to join the 'Estia' and 'Rent vs. Installment' schemes.
Keravnos' answer
Responding to the EDEK MP, the Minister of Finance states that "the Rent-for-Installment plan was available to the public for applications between 3/12/2023-6/9/2024 and 3-31/10/2024."
Throughout the application period, he adds, an advertising campaign was conducted, while officials made many appearances in the media. A call centre was also operated at the Cyprus Asset Management Company (KEDIPES) for the provision of answers and guidance to interested parties.
He also notes that after the re-acceptance of applications in October 2024, reactions were received from both the Association of Credit Acquiring Companies and Services the Association of Cyprus Banks.
"So far, some applications received in October 2024 have not been accepted by creditors for processing within the Scheme," he continues.
In light of the above, Keravnos clarifies that "the re-acceptance of applications to the 'Rent vs. Installment' plan or the introduction of a new state scheme at this stage is not considered feasible and is expected to have a low degree of success."
At the same time, Keravnos recalls that the Ministry of Finance has prepared four schemes to resolve non-performing housing loans: The two main ones were 'Estia' (2019) and 'Rent versus Installment' (2023), while the 'Oikia' (2021) and the Loan Regulation Plan of the Central Agency for Equal Burden Distribution (2019) were also introduced.
According to Keravnos, the problem of non-performing loans in Cyprus began to emerge before 2014, but that was the point at which official statistics were recorded.
"Many loans were non-performing long before 2014, and some even became non-performing shortly after they were granted, that is, 'from their birth'," he emphasises.
After so many years, he adds, significant resources have been invested by both creditors and the state to achieve consensual solutions.
The "thorns"
Regarding the possibility of implementing another scheme to protect primary residences, Keravnos indicates that the Ministry of Finance identifies two significant obstacles to a new plan for non-performing loans:
First, he explains, the cooperation of creditors is required:
"Government plans for non-performing loans require the voluntary participation of creditors. Grants for non-performing loans are not like ordinary government grants which are governed within the framework of the state-citizen relationship.
In NPL plans, the state intervenes between the creditor-borrower relationship, so for the plans to be successful, creditors must participate, each for their own portfolio.
Loan agreements are signed between creditors-borrowers and the property rights of creditors through the mortgage on the property are particularly protected in Cyprus, in the Constitution itself.
"This raises the question of how a state scheme will be implemented in the event that a large creditor refuses to participate in it," he says.
Secondly, the Minister of Finance continues, approval is required from the Directorate-General for Competition of the European Commission:
"As with previous plans, approval by the Directorate-General of Competition is required, a process that can take several months. The Directorate-General of Competition will examine whether creditors within the government plan will receive more than outside the plan. The difference between the two constitutes state aid to businesses," he further points out.
In addition to the above, in his response, the Minister of Finance emphasises that "banks have made very high provisions in the loan portfolio for these specific loans, that is, they have already recorded the losses because they expect that they will not collect them."
Based on these forecasts, he indicates, the loans were sold to credit acquisition companies.
“This means that a scheme should be provided in which creditors receive less than or equal to the amount they will recover in the long term. This implies that ultimately borrowers will pay very little for their loan,” he adds. However, he adds, “giving a later government scheme better terms than an earlier plan is neither fair nor economically rational because (a) the impression is created in the public that they are always expecting some (better) future plan and on the other hand (b) it is unfair to those who came to the first plans with less favourable terms for them.”
"In general, it is very difficult for the Ministry of Finance to argue that a new scheme is burdensome to creditors," the Finance Minister concludes.
(Source: InBusinessNews)
