While banks will be the ones to gain at the same time as borrowers bear no responsibility for the whole situation

 

Statement by the General Secretary of AKEL A.Kyprianou on yesterday’s Parliamentary decision on loans

AKEL C.C. Press Office, 30th March 2020, Nicosia

Following yesterday’s plenary session of the House of Representatives, an attempt is underway to convince borrowers that what happened is to their benefit.

That’s not the case. The reality is that nothing will be gifted to borrowers. Not only will nothing be gifted to them, but from this critical juncture in which everyone must contribute towards overcoming the crisis, they will pay more while the banks will be the ones to gain at the same time as borrowers in this particular case bear no responsibility whatsoever for the whole situation created by the pandemic.

The only benefit that can come from the legislation as approved yesterday is that borrowers will not suddenly find themselves with non-performing loans. But if this favours borrowers slightly, it favours the banks much more.

Our initial position was that the interest for the 9 month period should have been frozen. They told us European mechanisms don’t accept that.

We appealed to the political forces to adopt our proposal that the interest that will not be paid over the next 9 months shouldn’t be paid back and should be transferred to the end of the repayment of the loan. Hence, the consequences for borrowers would be as little as possible. Not even this compromise proposal we had submitted was accepted.

What will now happen as a result of the legislation passed yesterday is that after nine months the paying back of interest will be put as an additional charge on to the loan of those who suspend their installment. That is to say, borrowers will have to pay a much larger amount and certainly not 55 Euros as the Central Bank claims.

The proposal submitted by AKEL and others that there should be a suspension of installments automatically and that only those who would wish to continue repaying their installments should send a letter to the banks was rejected. They rejected our proposal and counter-proposed that a letter is sent to the banks by all those borrowers who will ask for a suspension calling on them to substantiate why. Of course they say this will be a formal procedure.

When we objected that there are people that would find it difficult to write such a letter, we were told that their relatives, children or grandchildren, would help. This argument is totally out of place in quarantine. The main problem, of course, is that the banks will be flooded with thousands of applications that will be difficult to process in the little time we have until tomorrow (when the relevant bill will be tabled for approval/rejection).

Various arguments have been put forth to reject AKEL’s proposal, which are not substantiated. It is inconceivable that the Constitution is invoked selectively. In 2013 to impose the haircut on bank deposits and save the banks from the deposits of the people overnight the Constitution and any other legislative provision that safeguarded contracts between banks and depositors was bypassed. Today, to deal with this situation, daily decrees are being issued, extraordinary powers are given to the executive power because we all understand the criticality of the situation. However, how is it that the government, the ruling DISY party and those who support them in the House of Representatives are claiming that the criticality of the situation is reason enough to freeze everything but not the banks’ ability to speculate and profit?

AKEL insisted until the very last moment that there should be a consensus before yesterday’s Parliamentary session. Unfortunately, there wasn’t consensus on the pretext that they would press the banks to implement what we had asked for. Since yesterday they have already been on mass media outlets stating that they will press the banks to do what we were demanding. If the situation wasn’t so serious, what we are seeing would be a real joke. The logical question is, why didn’t they put pressure on the banks all the previous time before the relevant legislation was tabled in Parliament for approval? Why did they allow the legislation to be passed first and then to subsequently demand it?

Over the last week we have seen a lot of fierce criticism on the part of DISY about the Banks. They are even shaking their finger threateningly at them. We consider this is mocking the people. We want DISY’s attitude to be expressed by voting in favour of bills and not just by issuing threats without any meaning.