Chypre
The Cyprus banking sector has voiced strong concerns over roughly 30 proposed amendments to the country’s foreclosure framework, which are scheduled for discussion on Monday at the Parliamentary Finance Committee.
In a briefing note, Michalis Kronides, Senior Director of the Cyprus Banks Association, warned that passing the proposed legislation could have negative consequences for credit institutions, the stability of the financial system, and potentially the credit rating of the Cypriot economy. The proposals could suspend or significantly delay property foreclosure procedures.
According to Kronides, the existing legal framework already includes reliable mechanisms allowing borrowers to challenge foreclosure proceedings. Debtors can seek court injunctions to suspend a sale and may also turn to the Financial Ombudsman for disputes relating to charges, unfair contract terms, and mediation.
He warned that repeated attempts to amend the foreclosure framework risk making the process ineffective, particularly given the already lengthy delays in the court system.
International organisations, including credit rating agencies, the European Commission, and the International Monetary Fund, have consistently identified Cyprus’ high private debt as the country’s main economic challenge. Kronides stressed that this issue requires a comprehensive solution rather than repeated legal amendments.
He noted that most problematic loans date back decades and have already been terminated, subject to court proceedings, or even court judgments. Simply suspending foreclosures, he argued, does not solve the problem but prolongs uncertainty and keeps borrowers outside the banking system.
Data from the Financial Ombudsman also raised questions about borrower engagement. In 2025, around 200 applications were submitted to suspend foreclosures, yet only six requests were made to review the outstanding debt amount.
The banking association also questioned the constitutionality of several proposals. Some provisions would give additional procedural rights to mortgaged borrowers while restricting creditors’ property and contractual rights under the Constitution.
Banks are particularly opposed to proposals that would halt interest charges once a debt reaches twice the original loan amount. According to Kronides, such a measure could increase borrowing costs, encourage strategic defaults, and weaken loan portfolios.
Additional concerns relate to proposed changes affecting guarantors and the possibility of writing off remaining debt after a property auction if sale proceeds do not cover the outstanding balance.
European supervisory authorities, including the European Central Bank and the European Banking Authority, have previously warned that changes to foreclosure timelines can increase credit risk and raise capital requirements for banks.
The association concluded that approving the proposals could increase the risk profile of Cyprus’ banking system, create legal uncertainty, and potentially lead to a downgrade of the country’s creditworthiness.
