NICOSIA, June 7 (Xinhua) -- Cypriot Finance Minister Harris Georgiades proposed a plan which he said aims at helping commercial banks reduce the volume of non-performing loans (NPLs), sources said on Thursday.
Parliamentary party technocrats who took part in a meeting at the ministry of finance said Georgiades proposed a package to improve the insolvency and foreclosure laws in a bid to tackle the hot problem of NPLs.
Non-performing loans are the legacy of the 2013 financial crisis that led to the 10-billion-euro (11.8 billion U.S. dollar) bailout of Cyprus by the Eurogroup and the International Monetary Fund, and the resolution of the banks, including the world's first bail-in, the recapitalization of Bank of Cyprus with depositors' money.
Despite a considerable reduction, NPLs still stand at about 21.2 billion euros, or close to 44 percent of the banks' total loan portfolios.
Georgiades told the parties in a letter explaining the reasoning behind the proposal, that banks should be helped to deal with what he described as strategic defaulters, owners of large loans who do not service them in the hope of gaining a profit from their tactics.
The sources said the parties' technocrats, all except one of which come from the opposition, were not satisfied with the proposals, as they thought they aimed at helping the banks instead of helping small loan owners to keep their primary residence.
The minister said small loan owners were protected by legislation which prevents the foreclosure on mortgages of primary residence.
Georgiades also said that helping the banks reduce the burden of NPLs and thus make more money available for investment will also help the economy expand faster.
"The aim is to tackle the problem of strategic loan defaulters while continuing the protection of the vulnerable sections of society," Georgiades said.
The minister's plan is expected to now go before the full parliament where opposition parties are expected to table their own amendments in favor of small loan owners.
