Roundup: Banks set in motion procedure for collateral property repossession

The three main Cypriot banks have cautiously set in motion the procedure to repossess mortgaged properties securing non-performing loan on the same day as bailout legislation came into force.

The new legislation allows for the speedy sale of collateral in bad loans, replacing old legislation under which the repossession procedure could drag on for up to 15 years or more.

All three main lenders have already sent notices to debtors and guarantors notifying them of the impending auction of properties securing loans amounting to at least 160 million euros (176 million U.S. dollars), the state ran radio reported on Wednesday.

The new legislation allowing a quick repossession of properties was passed by the Cypriot parliament as a prior requirement for the eastern Mediterranean island's 10-billion-euro bailout deal concluded in March 2013.

It is intended to help the banks deal with a mountain of non-performing loans which stood at 26.9 billion euros in May, or 45.85 percent of total loans.

The repossessions procedure is intended as a pilot project as the properties involved secured red loans, for which court decisions had been issued prior to the onset of the 2013 economic crisis.

The decisions have become final, meaning there is no further room for legal maneuvering by debtors.

Sources at the Bank of Cyprus said notices are being handed to about 25 debtors for the sale of commercial properties worth just over 85 million euros. Bank of Cyprus is the main systemic bank of the island, having taken over former Cyprus Popular Bank (Laiki) which was wound down by international lenders in the 2013 resolution of the banking system.

It also involved the recapitalization of Bank of Cyprus with the money of large depositors, mainly Russian oligarchs in the world's first bail-in.

Much smaller Hellenic Bank, which also changed owners after it recapitalized last year, said it has started issuing sale writs for properties of a yet unspecified amount.

The Cooperative Central Bank, which is the central banker for 21 regional cooperative credit societies, said notices have been served for the sale of mostly small properties securing demands amounting to 75 million euros.

All three lenders have said they have excluded primary residence from the pending auction of properties.

Safeguarding primary residence and the premises of small businesses had been a sensitive political issue during the debate of the repossessions and insolvency legislation.

Banks are treading cautiously on the issue as they loathe provoking reaction by lawmakers. (1 euro = 1.10 U.S. dollars) Endit