It was Herodotou’s first gathering with the banks since taking office. It would be the first in a series of regular meetings, a CBC statement said.

The timing of the meet is significant, coming a day ahead of a vote in parliament, where MPs will decide whether to accept or reject a presidential veto on a recent bill making amendments to foreclosures legislation – changes which the government and the banking industry warn could destabilise the financial sector.

The changes were introduced by opposition parties, and would result in dragging out repossession proceedings, with banking authorities here and overseas cautioning it would make it tougher on banks to achieve repayment of loans in arrears that are secured by physical collateral.

Opposition MPs say their only concern is protecting homeowners against lenders.

Should MPs insist on their bill and reject the presidential veto on Friday, the matter would be referred to the supreme court.

During Thursday’s meeting with bankers, Herodotou raised the issue of cases where lenders have dragged their feet in implementing the central bank’s ‘Code of Conduct on the Handling of Borrowers in Financial Difficulties’.

The code of conduct obliges banks to exhaust all possible avenues for restructuring a loan before resorting to repossessing on a mortgaged property.

The meeting called by Herodotou may have been intended to ‘soften up’ opposition parties ahead of their vote on the presidential veto, by conveying to MPs the message that the central bank understands politicians’ concerns about homeowners.

If parliament does uphold the contentious bill on Friday, it could take months until the supreme court rules on the matter.

In the interim, the uncertainty looming over the efficacy of repossessions could damage the financial sector, for example by banks being required to increase capital provisions as a buffer against weaker collection of non-performing loans.

Source: Cyprus Mail