Banks find bureaucratic and regulatory obstacles in the bill prepared by the Central Bank, regarding the securitization and selling of loans.

The legal service puts the finishing touches to the text of the bill which is a commitment of the memorandum. With this bill, banks will be able to sell loans to credit or financial institutions which are approved by the Central Bank or to credit acquisition companies that will be set up in Cyprus.

Banks, through the Association of Cypriot Banks, have identified points in the bill that may act as an inhibiting factor in attracting financial institutions or licensed funds for participation in the process of loan purchasing.

For example, it is pointed out that in the preliminary draft of the bill there was no provision for the tax regime that will govern such transactions.

Pursuant to the provisions of the bill investment funds abroad, while approved by the competent supervisory authorities of the home country, will not be able to participate in the loan purchase process since they are not licensed by the Central Bank of Cyprus.

According to the association, the procedures in the bill for securing a license by CB, are complex and time consuming and it is estimated that interest by these funds will be minimal.

For the examination and approval of a license by the Central Bank two months’ time will be needed.

The association proposed to the CB that financial institutions or investment funds or other funds that are licensed by their country's supervisory authority or listed in stock exchanges, be allowed to manage loans from domestic banks.

The bill allows the purchase of loans by credit acquisition companies, which should be incorporated in Cyprus and be approved by the CB, so that they are subject to the provisions of this law and CB will be able to check the suitability of their shareholders, among others.

The association disagrees with the provision of the bill regarding the identification of the 20 largest shareholders of the interested financial institutions given that they will have more than 5% of share capital.

The association suggests that the CB asks for the identification of the 10 largest shareholders controlling more than 10% of the share capital of companies or funds where they are members of the Board of Directors.

This provision was included as a safeguard so that financial institutions or investment funds of Turkish interests will not be allowed to purchase loans of natural or legal persons.

It is further noted that the provision for the imposition of measures against organizations’ or companies’ directors or managers who may commit a mistake, is also a deterrent to some who would not want to take the responsibility for a mistake which may have been committed by the company or organization at which they are employed.

The content of the draft law is a prerequisite (prior action) for Troika to complete the last evaluation of the implementation of the Cypriot program.

After legal examination, the bill will be submitted to the Cabinet for approval and then to the House of Representatives.